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HOMEWORK: MIDTERMS

1. DEFINE THE FOLLOWING TERMS:

A. Merger

Voluntary amalgamation of two firms on roughly equal terms into one new legal entity.
Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the
new firm. Owners of each pre-merger firm continue as owners, and the resources of the
merging entities are pooled for the benefit of the new entity. If the merged entities were
competitors, the merger is called horizontal integration, if they were supplier or customer
of one another, it is called vertical integration.

B. Acquisition

An acquisition is a corporate action in which a company buys most, if not all, of another
firm's ownership stakes to assume control of it. An acquisition occurs when a buying
company obtains more than 50% ownership in a target company. As part of the exchange,
the acquiring company often purchases the target company's stock and other assets,
which allows the acquiring company to make decisions regarding the newly acquired
assets without the approval of the target companys shareholders. Acquisitions can be
paid for in cash, in the acquiring company's stock or a combination of both.

C. Divestiture

Selling of, or otherwise disposal of, a firm's assets to achieve a desired objective, such as
greater liquidity or reduced debt burden. In accounting, divestiture transactions are
recorded as a one time, non-recurring gain or loss.

D. Conglomerate

Large corporation run as a single business, but made up of several firms (acquired
through mergers or takeovers) supplying diverse goods and/or services.

E. Subsidiary

An enterprise controlled by another (called the parent) through the ownership of greater
than 50 percent of its voting stock.

F. Parent Company
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Firm that owns or controls other firms (called subsidiaries) which are legal entities in
their own right. Also called parent corporation.

2. PROVIDE TWO SPECIFIC EXAMPLES FOR EACH OF THE TERMS. TERMS E

AND F ARE CONNECTED SO YOU CAN HAVE TWO EXAMPLES FOR BOTH
TERMS.

A. Merger

-Laptop company A merges with cellphone company B. The combination of the two
companies involves a transfer of ownership, either through a stock swap or a cash payment
between the two companies. Both companies surrender their stock and issue new stock as a new
company.

- CMC merges with TCS:

This is an example where there is a merger in the same industry (horizontal). It was done to
consolidate the IT businesses. The objective of this merger, as indicated by the management of
CMC, was that the amalgamation will enable TCS to consolidate CMC's operations into a single
company with rationalised structure, enhanced reach, greater financial strength and flexibility.
Further it also indicated that, it will aid in achieving economies of scale, more focused
operational efforts, standardisation and simplification of business processes and productivity
improvements.

B. Acquisition

- As per the deal, Ranbaxy shareholders will get four shares of Sun Pharma for every five shares
held by them, leading to 16.4% dilution in the equity capital of Sun Pharma (total equity value is
USD3.2bn and the deal size is USD4bn (valuing Ranbaxy at 2.2 times last 12 months sales).

Reason for the acquisition: This is a good acquisition for Sun Pharma as it will help the
company to fill in its therapeutic gaps in the US, get better access to emerging markets and also
strengthen its presence in the domestic market. Sun Pharma will also become the number one
generic company in the dermatology space. (currently in the third position in US) through this
merger.
- One of the largest mobile markets in the Southern Hemisphere was dominated by two major
players: the local behemoth and its biggest foreign-based competitor. Together they owned more
than 70 percent market share. The marketplace was waiting for something to loosen up the
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competitive gridlock. It came in the form of a joint venture between the number three and four
mobile providers.

C. Divestiture

- Thomas Reuters Corporation, a multinational mass media and information company based
in Canada, sold its intellectual property and sciences (IP&S) division on July 14, 2016.
Thomas Reuters initiated the divestiture because it wanted to reduce the amount of leverage
on its balance sheet.

- Cisco IT recently completed a TrustSec project to assist in the divestiture of CPE business
to Technicolor which was announced in July, 2015.

When Cisco sold a portion of its video business to Technicolor in November 2015, some of the
transferred employees still needed access to certain resources on the Cisco network. These
employees would be working in Cisco officeslocated in Shanghai, China, and Lawrenceville,
Georgiauntil they transferred to Technicolor offices or the offices were turned over to
Technicolor. In the meantime, we needed a secure, economical way to give these employees
defined access to the Cisco network and its resources from the Cisco offices.

D. Conglomerate

- General Electric Company was one of the largest conglomerates in the world, with a
turnover of nearly $150 billion in fiscal year 2005. The company had interests in several
areas, broadly classified into six core business units covering industrial systems,
infrastructure, media, healthcare, consumer finance and commercial finance.

- The Tata group has been credited for aggressively pursuing several corporate social
responsibility (CSR) initiatives in India. The case describes the vision and mission of Tata group
which places importance on CSR. It then examines how the group's vision is translated into
action through the various community development initiatives.

E. Subsidiary and Parent Company Examples

PARENT COMPANY: Dell

SUBSIDIARY COMPANIES:
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ALIENWARE

MOZY

DELL PRODUCTS

STATSOFT

EQUALLOGIC

Etc.

SOURCES:

http://www.businessdictionary.com/definition/merger.html

http://www.investopedia.com/terms/a/acquisition.asp#ixzz4cQpnX03a

http://www.businessdictionary.com/definition/divestiture.html

http://www.businessdictionary.com/definition/conglomerate.html

http://www.businessdictionary.com/definition/subsidiary.html

http://www.businessdictionary.com/definition/parent-company.html

https://communities.cisco.com/docs/DOC-66235

http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG068.htm