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Master of Business Administration- smude MBA Semester 3 spring 2015

MF0011: Mergers and Acquisitions
Q1. Explain the five stage model of mergers and acquisitions.
Answer: The Five Stage Model
To examine the issues that possibly contribute to acquisition failure and value destruction, the author,
Sudi Sudarsanam, develops a five stage model of mergers and acquisitions, which advocates a view of
M&A as a process rather than a transaction. The process is regarded as a multi-stage one
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Q2. What do you understand by demerger? Write about the tax implications of demergers.
Explain the characteristics of demerger.
Answer: Meaning of Demerger
Large entities sometimes hinder entrepreneurial initiative, sideline core activities, reduce
accountability and promote investment in non-core activities. There is an increasing realization among
companies that demerger may allow them to strengthen their core competence and realize
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Q3. Explain about Employee Stock Ownership Plans (ESOP). Write down about the rules of
ESOP and types of ESOPS.
Answer: Employee Stock Ownership Plans (ESOP)
An Employee Stock Option is a type of defined contribution benefit plan that buys and holds stock.
ESOP is a qualified, defined contribution, employee benefit plan designed to invest primarily
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Q4. Write Short notes on :
Exchange rates
External advantages in differential products.
Political and economic stability
Answer: Exchange rates
Foreign exchange rates affect international mergers in a number of ways. The relative strength or
weakness of the domestic versus foreign currency can have an impact on the effective price paid for
an acquisition, its financing, production costs of running the acquired firm, and the
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Q5. Give the meaning of buyback of shares. Explain the objectives and guidelines for buyback
of shares.
Answer: Buy Back of Shares
The provisions regulating buy back of shares are contained in Sections 77A, 77AA and 77B of the
Companies Act, 1956. These were inserted by the Companies (Amendment) Act, 1999. The Securities
and Exchange Board of India (SEBI) framed the SEBI (Buy Back of Securities) Regulations,
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Q6. Explain the methods of accounting of amalgamation with example.
Answer: Methods of Accounting for Amalgamation
As per AS 14 there are two method of accounting for amalgamations:
(a) The Pooling of Interest Method (applicable in case of amalgamation in the nature of merger) and
(b) The Purchase Method (applicable in case of amalgamation in the nature of purchase
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