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Title Name Amity Solved Assignment Corporate Restructuring Mergers and Acquisitions
University AMITY
Service Type Assignment
Course M.Com
Semester Semester-II Course: M.Com
Short Name or Subject Code Corporate Restructuring Mergers and Acquisitions
Commerce line item Type Semester-II Course: M.Com
Product Assignment of M.Com Semester-II (AMITY)
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Solved Assignment


  Questions :-

                                                                       Corporate Restructuring, Mergers and Acquisitions

Assignment A

1.Mention the Difference between - Leverage Buy out, Venture capital & growth fund?

2.What do you mean by corporate control? Explain the how shares buy back work out?

3.Write notes on the following:-

A) Split off.

B) Amalgamation.

C) Hostile Takeover Bid.

4.Explain the Net Asset Value method of valuation of firm?   

5.Mention the types of merge & acquisition?

 6.what are the advantage of disinvestment in the Public Sector Units?      

7.Explain the Discounted Cash Flow method in details, with the help of suitable example?    

8.What do you mean by Leverage Buy out (LBO)? How Leverage Buy Out deals take place?    

 

 

 

 

        

 

  

 PART- B

Case Detail:

CASE STUDY

Tata Motors: Acquisition of Jaguar &

Land Rover

Ford Motors Company

Location: Dearborn, Michigan; Founded: 1903 by Henry Ford; Competitors: General Motors, Toyota;

Brand names: Lincoln, Mercury, Volvo, Mazda, Jaguar and Land Rover, CEO: Alan Mulally.

1913 - Assembly Line: “low priced, mass-produced automobile with standard interchangeable parts.” Hiring of African Americans, Virtual manufacturing, focus on safety, Advantage through fuel efficiency.

Jaguar: The ups and downs:

1922 - Founded in Blackpool as Swallow Sidecar Company

1960 - Jaguar name first appeared in 1935

1975 - Nationalized in due to financial difficulties

1984 - Floated off as a separate co in the stock market

1990 - Taken over by Ford

A statement of ultra luxury, Holds Royal warrants, Rarely advertised Ford’s formula one entry since 1990s.

1948: Land Rover is designed by the Rover Car co

1976: One millionth Land Rover leaves the production line

1994: Rover Group is taken over by BMW

2000: Sold to Ford for £1.8 billion.

The case of Land Rover:

Known for superior off-road performance, Used by military for projects and expeditions, Safe but less reliable, Makeover in recent times

Key issues:

  • Ford acquired Jaguar for $2.5 billion in 1989.
  • Ford acquired Land Rover for $2.75 billion in 2000.
  • But the US auto major put the two marquees on the market in 2007 after posting losses of $12.6 billion in 2006 - the heaviest in its 103-year history.

The Deal Process: - 12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar.

August 2007 - Major bidders are identified

Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo 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 Motors.
  • 02/06/2008 – The acquisition is complete

TATA MOTORS – A SNAPSHOT

TATA GROUP is 150 year old, Previously Tata Engineering and Locomotive Company, Telco.

Tata Motors? s break-even point for capacity utilization is one of the best in the industry worldwide

Listed on the New York Stock Exchange in 2004.

Making Waves Internationally

  • NANO will mark the advent of India as a global centre for small-car production and represent a victory for those who advocate making cheap goods for potential customers at the ´bottom of the pyramid´ in emerging markets.
  • International praise came from Standard & Poor’s, which in December 2006 expressed 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.”

Why is Ford selling?

  • 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 high 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 vehicles for Land Rover and

Jaguar is so intertwined.

Ratan Tata says?

  • We aim to support their growth, while holding true to our principle of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.„
  • ´We have enormous respect for the two brands and will endeavor to preserve and build on their
  • Heritage and competitiveness, keeping their identities intact,´ he said in a statement.

Advantages to acquire JLR?

  • Long term strategic commitment to automotive sector.
  • Opportunity to participate in two fast growing auto segments.
  • Increased business diversity across markets and products.
  • Land rover provides a natural fit for TML? SUV segment.
  • Jaguar offers a range of “performance/luxury” vehicles to broaden the brand portfolio.
  • Benefits from component sourcing, design services and low cost engineering

Tata and the dream

NEED FOR GROWTH

  • In the past few years, the Tata group has led the growing appetite among Indian companies to acquire businesses overseas in Europe, the United States, Australia and Africa - some even several times larger - in a bid to consolidate operations and emerge as the new age multinationals.
  • 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

  • Tata Motors is vulnerable to greater competition at home. Foreign vehicle makers including Daimler,

Nissan Motor, Volvo and MAN AG have struck local alliances for a bigger presence.

  • Tata Motors, which has a joint venture with Fiat for cars, engines and transmissions in India, is also facing heat from top car maker Maruti Suzuki India Ltd, Hyundai Motor, Renault and Volkswagen.

Analysts pick

  • Analysts indicate that Tata Motors can comfortably finance the acquisition of Jaguar 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 easily 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 0.56, 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 compete with likes of BMW and Audi.

“Taking over the brand is easy, bringing down production costs and turning around the company successfully, will be the challenge,” analysts said. It? s a test that Ford failed.

WHAT IS TATA PAYING FOR????

Inline image 1

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

  1. Tata Group has multiple levers

??Tata Auto Comp (TACO) - TATA group has a a rich ecosystem of JVs with leading players in

Auto ancillary space held through TACO.

??TCS, Corus and Tata Technologies have varied competencies in the Auto space

??We believe an improvement of 50-70bps in EBITDA margin possible in JLR over the next 2 years (current EBITDA margin)

- We estimate CY2007 EBITDA margin of JLR at around 6.5% – This could make the acquisition

PAT accretive in CY2009/FY10E

TAMO + JLR: Leverage and Valuation ratios

Leverage increases but coverage ratios reasonable

  • Headline Debt/Equity of TAMO would increase to 2.5x from 1x
  • Excluding the vehicle finance biz, leverage would go to 1.2x
  • EBITDA/Interest remains at 5.0

TAMO is trading inline/modest discount to global peers

  • EV/Sales (1-yr forward) of 0.5x against 0.4x for global peers
  • P/E (1-yr forward) of 6.5x against 8.5x for global peers

 

QUESTION

1.Write your observation regarding the JLR deal? Mention its advantages & disadvantages of this deal?

2.Why Ford Sell out these two iconic brands? Mention the reasons?  What worked for TATA:

3.What are the consequences of this deal financing on TATA group and its market position?

 

 

 

 

 Assignment C

Question No.  1          Marks - 10

The process of selling receivables is

Options          

  1. factoring
  2. leasing
  3. hiring
  4. selling

 

 

Question No.  2          Marks - 10

Recourse factoring involves getting back to          

Options          

  1. SEBI
  2. Govt
  3. company
  4. investors

 

 

Question No.  3          Marks - 10

Mutual funds reduce

Options          

  1. risk
  2. profits
  3. liquidity
  4. investment

 

 

Question No.  4          Marks - 10

Credit rating increases         

Options          

  1. confidence
  2. cost
  3. time
  4. investment

 

 

Question No.  5          Marks - 10

ADRs are issued only in      

Options          

  1. India
  2. USA
  3. UK
  4. Asia

 

 

Question No.  6          Marks - 10

Open ended funds carry      

Options          

  1. no entry load
  2. no exit load
  3. both of the above
  4. none of the above

 

 

Question No.  7          Marks - 10

financial services are

Options          

  1. lease
  2. mutual funds
  3. factoring
  4. all of the above

 

 

Question No.  8          Marks - 10

Tax funds      

Options          

  1. are tax free
  2. are taxable
  3. are income funds
  4. are growth funds

 

 

Question No.  9          Marks - 10

Hedging reduces       

Options          

  1. risk
  2. return
  3. profits
  4. investment

 

 

Question No.  10        Marks - 10

Portfolio means        

Options          

  1. investment in single security
  2. investment in group of securities
  3. invesment in govt securities only
  4. investment in bonds

 

 

Question No.  11        Marks - 10

But when the deal is unfriendly (that is, when the target company does not want to be purchased) it is always regarded as an "…………..".         

Options          

  1. reverse takeover
  2. lease
  3. merger
  4. acquisition

 

 

Question No.  12        Marks - 10

A ………………. is usually between two companies in the same business sector           

Options          

  1. Book Building
  2. Loan syndication
  3. venture capital
  4. horizontal mergers

 

 

Question No.  13        Marks - 10

A ………….. represents the buying of supplier of a business      

Options          

  1. vertical merger
  2. Loan syndication
  3. venture capital
  4. horizontal mergers

 

 

Question No.  14        Marks - 10

Conglomerate M&A is the third form of M&A process which deals the merger between two irrelevant companies.    

Options          

  1. vertical merger
  2. conglomerate merger
  3. venture capital
  4. horizontalmergers

 

 

Question No.  15        Marks - 10

An …………. is a merger: 1. approved by disinterested directors and 2. approved by disinterested stockholders  

Options          

  1. vertical merger
  2. conglomerate merger
  3. horizontalmergers
  4. arm´s length merger

 

 

Question No.  16        Marks - 10

A ……….. merger usually refers to long term strategic holding of target (Acquired) firm.     

Options          

  1. strategic merger
  2. conglomerate merger
  3. horizontalmergers
  4. arm´s length merger

 

 

Question No.  17        Marks - 10

 A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process.  

Options          

  1. TRUE
  2. FALSE
  3. can´t say
  4. depends

 

 

Question No.  18        Marks - 10

…………... means that the merged firm will have a greater value than the sum of its parts as a result of enhanced revenues and the cost base.        

Options          

  1. synergy
  2. repurchase price
  3. redemption price
  4. sales load

 

 

Question No.  19        Marks - 10

Economic of scale refer to the ………….. in unit cost achieved by producing a large volume of a product.           

Options          

  1. reduction
  2. increase
  3. keep same
  4. all

 

 

Question No.  20        Marks - 10

 …………….. are regarded as one of the activities the purpose of business expansion or a measure of external growth in contrast to internal growths.   

Options          

  1. reverse takeover
  2. lease
  3. merger
  4. hire purchase

 

 

Question No.  21        Marks - 10

Balanced funds have the features of          

Options          

  1. income funds
  2. growth funds
  3. both of the above
  4. none of the above

 

 

Question No.  22        Marks - 10

Money collected from mutual fund is invested in  

Options          

  1. shares
  2. debentures
  3. tax saving bonds
  4. all of the above

 

 

Question No.  23        Marks - 10

In which type of lease the lease contains a bargain purchase option to buy the equipment at less than fair market value 

Options          

  1. Operating
  2. Financial
  3. Cancellable
  4. non-cancellable

 

 

Question No.  24        Marks - 10

A poor credit rating indicates         

Options          

  1. high risk of default
  2. low risk of default
  3. high creditworthiness
  4. high net worth

 

 

Question No.  25        Marks - 10

Credit ratings are calculated from financial history and ……….

Options          

  1. current assets
  2. current liabilities
  3. current assets and liabilities
  4. fixed assets

 

 

Question No.  26        Marks - 10

Accurate business valuation is one of the most important aspects of M&A as valuations like these will have a major impact on the price that a business will be sold for.        

Options          

  1. TRUE
  2. FALSE
  3. can´t say
  4. depends

 

 

Question No.  27        Marks - 10

SPVin securitisation is         

Options          

  1. Special purpose van
  2. special purpose vehicle
  3. special public vehicle
  4. specific purpose van

 

 

Question No.  28        Marks - 10

Which lease is commonly used to acquire equipment on a relatively short-term basis  

Options                                                                                                               

  1. Operating
  2. Financial
  3. Cancellable
  4. non cancellable

 

 

Question No.  29        Marks - 10

Credit rating is assigned to  

Options          

  1. company
  2. group
  3. financial instrument
  4. managers

 

 

Question No.  30        Marks - 10

Which of the following is the credit rating of a sovereign entity, i.e. a national government.

Options          

  1. A sovereign credit rating
  2. bond credit rating
  3. corporate credit rating
  4. debtor credit rating

 

 

Question No.  31        Marks - 10

Portfolio management is done in    

Options          

  1. lease
  2. hire purchase
  3. mutual funds
  4. syndication

 

 

Question No.  32        Marks - 10

Income funds are preferred by       

Options          

  1. retired investors
  2. businessmen
  3. shareholders
  4. risky investors

 

 

Question No.  33        Marks - 10

FPOs help to 

Options          

  1. issue shares again
  2. bonds again
  3. reduce cost
  4. reduce risk

 

 

Question No.  34        Marks - 10

ADR and GDR help

Options          

  1. get foreign investments
  2. reduce risk
  3. increase profits
  4. increase costs

 

 

Question No.  35        Marks - 10

Venture capital firms invest through         

Options          

  1. shares
  2. cash
  3. bonds
  4. all of the above

 

 

Question No.  36        Marks - 10

Investment in mutual funds is         

Options          

  1. common portfolio
  2. diversified portfolio
  3. single portfolio
  4. single security

 

 

Question No.  37        Marks - 10

SEBI regulates          

Options          

  1. price of securities
  2. buying and selling of securities
  3. buyers of securities
  4. TYPES OF SECURITIES

 

 

Question No.  38        Marks - 10

GDR is          

Options          

  1. global deposits record
  2. global depository rceipts
  3. gross domestic record
  4. gross deposit receipts

 

 

Question No.  39        Marks - 10

GDR is used to         

Options          

  1. invest in assets
  2. Raise money from public
  3. Issue stocks
  4. sell products

 

 

Question No.  40        Marks - 10

Loan syndication helps        

Options          

  1. companies
  2. Govt
  3. SEBI
  4. stock exchange

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