1. What are the basic steps in Strategic Planning in Merger?

Ans.

Any merger and acquisition involves the following critical activities in strategic
planning processes. Some of the essential elements in strategic planning processes of
mergers and acquisitions are as listed her below.

1. Assessment of changes in the organization environment

2. Evaluation of company capacities and limitations
3. Assessment of expectations of stakeholders
4. Analysis of company, competitors, industry, domestic economy and
international economies.
5. Formulation of the missions, goals and policies
6. Development of sensitivity to critical external environmental changes
7. Formulation of internal organizational performance measurements
8. Formulation of long range strategy programs
9. Formulation of mid-range programmers an short-run plans
10. Organization, funding and other methods to implement all of the proceeding
elements
11. Information flow and feedback systems for continued repetition of all essential
elements and for adjustments and changes at each stage
12. Review and evaluation of all the processes

In each of these activities, staff and line personnel have important responsibilities in
the strategic decision make in processes. The scope of merger and d acquisition sets
the tone for the nature of mergers and acquisitions activities and in turn affects the
factors which have significant influence over these activities. This can be seen by
observing the factors considered during the different stages of mergers and acquisition
activities. Proper identification of different phases and related activities smoothens the
process involved in merger.
 2. Write short notes:

a. Spin Off

b. Divestitures

Ans.

Spin Off:

The certain of an independent company are through the sale or distribution of new
shares of an existing business/division of parent company. It is a kind of de-merger
when a existing parent company transforms into two or more separately re-organized
different entity. The parent company distributes all the shares it owns in a controlled
subsidiary to its own shareholder on a pro-rate basis. In this process, the parent
company gains effect to making two of the one company. It may be in the form of
subsidiary or a separate company. There is no money transaction in spin off. The
transaction is treated a stock dividend and tax free exchange. Both companies exist
and carry on business. It does not alter ownership proportion in any company. The
newly created entity becomes an independent company taking its own decision and
developing its own policies and strategies which need not necessary for a company
having brand equity or multy product company enters into collaboration with a
foreign company. Businesses whishing to streamline their operations often sell less
productive or unrelated subsidiary businesses as spin-offs. The spun-off companies
are expected to be worth more as independent entities that as part of a larger business.

Businesses wishing to streamline their operations often sell less productive or

unrelated subsidiary businesses as spin-offs. The spun-off companies are expected to
be worth more as independent entities that as parts of larger business.

B. Divestitures

Divestitures are a transaction though which a firm sells a portion of its assets or a
division to another Company. It involves selling some of the assets or division for
cash or securities to a third party which is an outsider. These assets may be in the
form of plant, division or product line, subsidiary and so on. The divestiture process is
a form of contraction for the selling company and means of expansion for the
purchasing company. For a business, divestiture is the removal of assets from the
books. Businesses divest by the selling of ownership stakes, the closure of
subsidiaries, the bankruptcy of divisions, and so on.

The buyers benefit due to low acquisition cost of completely established product line
which is easy to combine in his existing business and increase his profit and market
share. The seller can concentrate after divestiture more on profitable segment and
consolidate its business activities. The motive for divestitures is to generate cash for
the expansion of other product lines, to get rid of poorly performing operation, to
streamline the corporate firm or to restructure the company’s business consistent with
its strategic goals. Divestiture enables the selling firm to have more than lean and
focused operation.

3. Discuss Master Limited Partnerships

Ans.

MLP emerged during the late 1970s and early 1980s as a mean of assets securitization
financing initially among real-estate-based businesses. Typically, several smaller
partnerships were rolled into an MLP, with partners receiving MLP units in exchange
for their partnership interest. The format soon gained favor among upstream oil and
gas exploration and development companies and MLPs were eventually adopted by a
wide range of industries both in the U.S, and in Canada, where the format is known as
the Royalty Trust. Today’s MLPs are predominantly active the energy, lumber, and
real estate industries in the developed countries.

MLP are a type of limited partnership in which the shares are publicly traded. The
limited partnership interests are divided into units which are traded as shares of
common stock. Shares of ownership are referred to as units. MLPs generally operate
in the natural resources, financial services, and real estate industries. Unlike a
corporation, a master limited partnership is considered to be the aggregate of its
partner rather than a separate entity.

There are two types of partners in this type of partnership. They are called as general
partners and limited partners. The general partner is the party responsible for
managing the business and bears unlimited liability. The general partner is typically
the sponsor corporation or one of its operating subsidiaries. General partner receives
compensation that is linked to the performance of the venture and is responsible for
the operations of the company and, in most cases, is liable for partnership debt. The
limited partner is the person or group (retail investors) that provides the capital to the
MLP and receives periodic income distributions from the MLPs cash flow. The
limited partners have no day-to-day management role in the partnership.

It has the advantage of limited liability for the limited partners. The transferability
provides for continuity of life. MLP is not treated as an entity, it is treated as
partnership for which income allocated pro-rata to the partners. The advantage of
MLPs is the combination of the tax benefit of a limited partnership with the liquidity
of a publicly traded company.

MLPs allow for pass-through income, meaning that they are not subject to corporate
income taxes. The partnership does not pay taxes from the profit the money is only
taxed when unit holders receive distributions. The owners of an MLP are personally
responsible for paying taxes on their individual portions of the MLPs income, gains,
losses and deductions. This eliminates the “double taxation” generally applied to
(whereby the corporations the corporation pay taxes on its income and the
corporation’s shareholders also pay taxes on the corporation’s dividends). That is,
MLP is taxed as partnership avoids double taxation and the business achieves a lower
effective tax rate. The lower cost of capital resulting from the reduced effective tax
rate provides the partnership with a competitive advantage when vying against
corporations during competitive assets sales or bidding wars and can ultimately
provide a higher return to unit holders.

Different Types of MLPs

• Roll up MLP:

Formed by combination of two or more partnerships into one publicly traded

partnership

• Liquidation MLP:

Formed by a complete liquidation of a corporation into an MLP

• Acquisition MLPs:

Formed by an offering of MLP interest to the public with the proceeds used to
purchase assets.

• Roll Out MLPs:

Formed by corporations’ contributions of operating assets in exchange for

general and limited partnership interest in MLP, followed by a public offering
of limited partnership interest by the corporations of the MLP or both.

• Start Up MLP:

Formed by partnership that is initially privately held but later offers its interest
to the public in order to finance internal growth.