Professional Documents
Culture Documents
Q.1 Mention the Difference between - Leverage Buy out, Venture capital & growth
fund?
Q.2 what do you mean by corporate control? Explain the how shares buy back work
out?
Q.3 Write notes on the following:A) Split off.
B) Amalgamation.
C) Hostile Takeover Bid.
Assignment B
Q.7 Explain the Discounted Cash Flow method in details, with the help of suitabl
e example?
Q.8 what do you mean by Leverage Buy out (LBO)? How Leverage Buy Out deals take
place?
Q.9 what are the reason of Merger & Acquisition?
CASE STUDY
The Deal Process: - 12/06/2007- Announcement from Ford that it plans to sell Lan
d Rover and Jaguar. August 2007 - Major bidders are identified
Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apoll
o Management
India?s Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b)
03/01/2008 - Ford announces Tatas as the preferred bidders
26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Moto
rs.
02/06/2008 - The acquisition is complete
NANO will mark the advent of India as a global centre for small-car production a
nd represent a victory for those who advocate making cheap goods for potential c
ustomers at the 'bottom of the pyramid' in emerging markets.
International praise came from Standard & Poor's, which in December 2006 express
ed the view that the "policy to support its companies and the improved financial
profile of its entities also enhances the overall financial flexibility of Tata
Motors."
Reports said losses at Jaguar stood at USD 715 million in 2006. Jaguar has been
a dog i.e. it has not been able to provide any profit for ford because of the hi
gh manufacturing costs provided in the United Kingdom.
The strong boy Land Rover's profit, on the other hand, was driven by the record
sale of 2.26 lakh vehicles, an 18% YoY growth in 2007..
Bringing down production costs and turning around the company successfully will
be the challenge," analysts said. It?s a test that Ford failed.
Ford is combining both the brands since the products and manufacturing of vehicl
Tata Motors is India's largest automobile company, with revenues of $7.2 billion
in 2006-07. With over 4 million Tata vehicles plying in India, it is the leader
in commercial vehicles and the second largest in passenger vehicles.
COMPETITIVE ADVANTAGE
or a bigger presence.
Tata Motors, which has a joint venture with Fiat for cars, engines and transmiss
ions in India, is also facing heat from top car maker Maruti Suzuki India Ltd, H
yundai Motor, Renault and Volkswagen.
Analysts pick
Analysts indicate that Tata Motors can comfortably finance the acquisition of Ja
guar and Land Rover. The Indian automaker is sitting on a cash pile of over Rs 6
,000 crore and generated free cash of over Rs 1,000 crore during FY07. It can ea
sily use these reserves to raise more funds without endangering its finances. At
the end of last financial year, Tata Motors? debt-to-equity ratio was a low 0.5
6, giving it ample head room to raise more funds.
Over the next 3-4 years, Tata Motors plans to invest Rs 12,000 crore in setting
up new units for a small car, trucks and SUVs and also to expand the capacity of
its existing units.
challenge for Tata Motors. These marquee brands have very high production costs
and require phenomenally high engineering and research capabilities as they comp
ete with likes of BMW and Audi. "Taking over the brand is easy, bringing down pr
oduction costs and turning around the company successfully, will be the challeng
e," analysts said. It?s a test that Ford failed.
FINANCING WAYS
Low leverage of the auto biz provides funding flexibility
Currently financed the purchase through a $3bn, 15month bridge loan
- It intends to refinance the loan through long-term funds
valuable stakes in group companies
- owns $400m of Tata Steel at current prices
- owns stake in Tata Sons (Tata Group?s holding company) worth at least $600m
Q.10 a)Write your observation regarding the JLR deal? Mention its advantages & d
isadvantages of this deal?
b) why Ford Sell out these two iconic brands? Mention the reasons?
c) what are the consequences of this deal financing on TATA group and its market
position?
ASSIGNMENT -C
1. ________is equal to the total market value of the firm's common stock divided
by (the replacement cost of the firm's assets less liabilities).
A) Book value per share
B) Liquidation value per share
C) Market value per share
D) Tobin's Q
E) None of the above.
2. High P/E ratios tend to indicate that a company will _______, ceteris paribus
.
A) grow quickly
B) grow at the same speed as the average company
C) grow slowly
D) not grow
E) none of the above
3. ________ are analysts who use information concerning current and prospective
profitability of a firms to assess the firm's fair market value.
A) Credit analysts
B) Fundamental analysts
C) Systems analysts
D) Technical analysts
E) Specialists
4. _______ is the amount of money per common share that could be realized by bre
aking up the firm, selling the assets, repaying the debt, and distributing the r
emainder to shareholders.
A) Book value per share
B) Liquidation value per share
C) Market value per share
D) Tobin's Q
E) None of the above
5. The ______ is a common term for the market consensus value of the required re
turn on a stock.
A) dividend payout ratio
B) intrinsic value
C) market capitalization rate
D) plowback rate
E) none of the above
C)increases the market price of the acquirer's stock over what it would have bee
n without the acquisition.
8. A tender offer is
9. You are considering acquiring a common stock that you would like to hold for
one year. You expect to receive both $2.50 in dividends and $28 from the sale of
the stock at the end of the year. The maximum price you would pay for the stock
today is _____ if you wanted to earn a 15% return.
A) $23.91
B) $24.11
C) $26.52
D) $27.50
E) none of the above
10. The public sale of common stock in a subsidiary in which the parent usually
retains majority control is called
A) a pure play.
B) a spin-off.
C) a partial sell-off.
D) an equity carve-out.
A) divestiture.
d) Vertical Merger.
make money
be independent
be famous
be powerful
Q.18. The _________ of a venture could be that the company has experience in rel
ated
business.
a. Strength
b. Weakness
c. Opportunity
d. Threat
20. Many mergers begin through a series of negotiations between the two companie
s. If the two companies decide to seriously investigate the possibility of a mer
ger, they will launch Phase II Due Diligence and execute a:
a. Post Merger Contract
b. Formal Joint Conference
c. Merger & Acquisition Agreement
d. Letter of Intent
21. Either party in a merger and acquisition may be entitled to indemnification
because of a significant misrepresentation. Indemnification is usually not due u
ntil a certain threshold has been reached. This threshold amount is often called
the:
a. Reciprocal Amount
b. Basket Amount
c. Striking Price
d. Closing Rate
22.On March 3, 1998, Miser Steel made a tender offer to acquire Reliance Steel.
Miser's tender offer is set to expire on March 23, 1998. On March 21, 1998, anot
her company called Ohio Steel made a tender offer to acquire Reliance Steel. Bas
ed on consideration of Ohio Steel's tender offer, the closing date for Miser Ste
el's tender offer is:
a. March 21, 1998
b. March 23, 1998
c. March 25, 1998
d. March 31, 1998
23.Due diligence requires the collection of a lot of information. Which of the f
ollowing information types would be least important for due diligence to work pr
operly?
a. Employment Records of Target Company
b. Property Records of Competing Companies
c. Financial Records of Target Company
d. Property Records of Target Company
24.Due diligence will attempt to restate financial statements in relation to wha
t will take place after the two companies merge. One area of particular concern
as it relates to the Balance Sheet is:
a. Proper Valuation of Cash
b. Par Value Assigned to Stock
c. Selection of Depreciation Methods
d. Possible Understatement of Liabilities
25.Due diligence is particularly important in the case of a reverse merger since
it is necessary to "clean the Shell Company." One important aspect of cleaning
the Shell Company is to:
a. Confirm ownership of the Shell Company
b. Identify cultural and social issues
c. Plan for long-term integration
d. Evaluate human resource capital
Q.34. The following are important motives for privatization except:(a). Revenue for the government.
(b). Increased efficiency.
(c). Conglomerate merger.
(d). Privatization.
Q.36 Suppose that the market price of Company X is $45 per share and that of Com
pany Y is $30. If X offers three-fourths a share of common stock for each share
of Y, the ratio of exchange of market prices would be:
A) .667
B) 1.0
C)1.125
D) 1.5.
A).a corporation's actions may convey information about its future prospects.
B).management is reluctant to provide financial information that is not required
by law.
C).agents incur costs in trying to obtain information.
D).the financial manager should attempt to manage sensitive information about th
e firm.
A). Enables the acquirer to make an all-equity purchase, thereby avoiding additi
onal financial leverage.
B). Enables the acquirer to diversify its asset base.
C). Increases the market price of the acquirer's stock over what it would have b
een without the acquisition.
D). Increases financial leverage.
Q.40Bidding companies often pay too much for the acquired firm. The hubris hypot
hesis explains this by suggesting that the bidders