MF0011_Merger.docx

8/14/2019 MF0011_Merger.docx

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MODEL QUESTION PAPERSUBJECT CODE : MF0011SUBJECT : Mergers andAcquisitionsSECTION A

1. The consequence of larger sizeand greater earnings stability ofmerged firm is ………..

a. Diversification

b. Lower financing cost

c. Earnings growth

d. Managerial effectiveness

2. Merger of companies engagedin unrelated business iscalled……..

a. Horizontal merger

b. Vertical merger

c. Circular combination'

d. Conglomerate

3. Increase in efficiency throughsharing of resources andtechnology and elimination ofneedless duplication is the keyof………..

a. Strategic benefits

b. Economies of scale

c. Complementary resources

d. Utilization of Surplus funds

4. Those synergies that allow firmsto increase their operating incomefrom existing assets arecalled……………

a. Operating synergy

b. Financial synergy

c. Managerial synergy

d. Market

5. The synergy that allows firms toincrease growth is called……..

a. Operating synergy.

b. Financial synergy

c. Managerial synergyd. Marketing Synergy

6. Economies of scale allows firmto become…………

a. Cost efficient and profitable

b. Costly and non-profitable

c. Profitable

d. Cost effective

7. Which of the following is the firststep of merger process?

a. Set the objective

b. The selection criteria

c. Evaluation and structuring theoffer

d. Due diligence anddocumentation

8. Due diligence is ………….. Ofproposed merger

a. very detail investigation

b. very extensive

c. very detail and extensive

d. very detail discussion

9. Merger is a special type of………

a. Working capital decision

b. Dividend decision

c. Capital budgeting decision

d. Portfolio decision

10. Divesture means transactionthrough which

a. A firm sells a portion of itsassets or a division to othercompany

b. A firm sells all of its assets toother company

c. A firm sells shares in the marketto create a new company

d. A firm is broken in two parts

11. The corporate restructuringprocess in which parent company

sells its shares in subsidiary tooutsider is known as………..

a. Joint venture

b. Sell-off

c. Spin-off

d. Equity carve out.12. Which of the following methodof corporate restructuring isquestioned on the basis ofmanagement can have unfairadvantage in negotiations?

a. Divestures

b. Sell-off

c. Spin-off

d. Management buyouts

13. Which of the following is theriskiest part of a LBOs capitalstructure?

a. Senior debt

b. Subordinate debt

c. ordinary shares

d. Loan stock

14. In which method of corporaterestructuring employees is usuallygiven a share of the corporationafter a certain length ofemployment or they can buyshares at any time?

a. Leveraged buyouts

b. Management buyouts

c. master Limited partnership

d. Employee stock ownershipplans

15. When a group of managersbuy the business they work in fromits existing buyers, it is called………



a. Leveraged buyouts


c. Master limited partnership

d. Employee stock of ownership

plans

16. Which business does have thekey rational to diversify risk?

a. Partnership

b. Joint Venture

c. Proprietorship

d. Mutual concern

17. What is necessary for everyproposed joint venture?

a. Identifying objectives

b. Selecting a partner

c. Choosing the business formd. Identifying legal problem

18. Which one of the following isnot are the key rational behind the

joint ventures?

a. To augment insufficient financial

or technical ability to enter aparticular line or business.

b. To share technology & genericmanagement skills in organization,planning & control

c. To obtain distribution channelsor raw materials supply

d. To extend activities with largerinvestment than if doneindependently

19. What approach to businessvaluation is rooted in the economicprinciple of competition?

a. Assets based approach

b. Income approach

c. Market approach

d. Divided approach

20. What is the name of valuationwhich is based on simple rate ofreturn on capital employed?

a. Assets value

b. Market value

c. Capitalized earnings

d. Cost value

21. What is the value quoted forlisted company's share at thestock exchanges?

a. Assets value

b. Capitalized earnings

c. Cost value

d. Market value

22. What may be one of the mosturgent and compelling challengesfacing business today forimproving the acquisition?

a. Integration process

b. Valuation process

c. Contract process

d. Payment process

23. The people who focus on theshort-term benefits from mergersand acquisition such as costreduction are known as ………a. Merging company

b. Resulting company

c. Stakeholders

d. Lenders

24. What are conveniently blamedwhen mergers go bad?

a. Cultural problems

b. Planning problems

c. Integration problems

d. Problem of Due Diligence

25. How much equity shareholdersof transferor company shouldbecome equity shareholders of thetransferee company by virtue ofthe amalgamation in case ofamalgamation in the nature ofmerger as per As - 14?

a. 70%

b. 80%

c. 90%

d. 100%

26. What does refer to uniting ofinterest?

a. Interest due

b. Interest received

c. Interest paid

d. Pooling of Interest

27. What method of considerationis called of A Ltd. takes over thebusiness of B Ltd. for Rs. 50 lacs?

a. Net Assets method

b. Lump sum method

c. Net payment method

d. Intrinsic worth method.

28. What can be triggered by atarget company when a hostilesuitor acquires a predeterminedpercentage of co. stock?

a. Divertiture

b. White Knight

c. Poison pills schemed. Golden parachutes

29. What is the name of adefensive strategy in which thetarget company's managementmay seek out a friendly acquirer?

a. poison pills

b. Divestiture

c. Golden parachutes



d. White Knight

30. What is the name of takeover ifthe board rejects the offer, but thebidder continues to pursue it?

a. Friendly take over

b. Bail out take over

c. Hostile take over

d. Reverse take over

31. What should be done by thecompany to increase prometersholding?

a. Issue Right shares

b. Issue Bonus shares

c. Buy back of shares

d. Make new issue

32. How much percentage ofshares or voting rights canacquired without making a publicoffer?

a. 10%

b. 15%

c. 20%

d. 25%

33. What is a transaction in whicha company, spin off all of itssubsidiaries to its shareholders &ceases to exist?

a. Spin-off

b. Equity caverout

c. Split-off

d. Merger

34. What does result in thetransfer by a company of one ormore of its undertakings to anothercompany?a. Merger

b. Amalgamation

c. Demerger

d. Winding-up

35. ………………………...isworked out on the basis of pastdata of the company?

a. Fair price

b. Market price

c. Breakup value

d. Net Assets value

36. In which type of shareexchange ratio price earnings ratioof both the offer and offeredcompanies will be compared tofudge relative growth prospectus?

a. Market price

b. Dividend payout ratio

c. Price Earnings ratio

d. Debt-Equity ratio

37. What does affect the successof cross-border mergers andacquisitions?

a. Consideration

b. Global mindset

c. Swap ratio

d. Agreement

38. What is called to price of onecountry's money in relation toanothers?

a. Money Inflation

b. Money devaluation

c. Exchange rate

d. Pricing policy

39. What was the purchaseconsideration of Imperial EngergyPlc which was acquired by the oiland Natural Gas Corp. in January2009?

a. $ 2.7 million

b. $ 2.8 million

c. $ 2.9 million

d. $ 3.1 millon40. In which year Merick KGaAacquired all outstanding shares ofcommon stock of minipore?

a. Feb. 2009

b. Feb. 2010

c. March 2010

d. April 2010

SECTION B

41. Who get the advantage ofincreasing the size of thecompany, restructuring of thefinancial composition of thecompany after mergers andacquisitions?

a. Shareholders

b. Promoters

c. Managers

d. Consumers

42. Two companies A Ltd. and BLtd. combined to gain certaineconomies from the larger volumeof operations, intensive utilizationof production capacities anddistribution network. Such benefits

are raised due to………

a. Economies of scale

b. Expansion

c. Integration

d. Tax shield

43. Combination of two firmswhere one is having excess cashwith other having excellentinvestment opportunities is anexample of ………

a. Operating synergy

b. Managerial synergy

c. Financial synergy

d. Economies of scale



44. When two organizations havesimilar cultures, systems,management processes andstructures, such type of buildingblock for the creation of synergy isknown as………….

a. Strategic compatibility

b. Organizational compatibilityc. Managerial Actions

d. Value creation

45. Measurement of historicalperformance of existing businessand determination of expectedreturn is done in the followingprocess:

a. Set the objective

b. The selection criteria andinformation collection

c. Evaluation and structuring theoffer

d. Due diligence anddocumentation

46. Which of the following types ofPost-acquisition integration requirehigh degree of strategicinterdependence?

a. Preservation, synergy

b. Holding co., synergy

c. Synergy, Absorption

d. Holding co., Absorption

47. Which of the following is aqualified, defined contribution,employee benefit plan designed toinvest primarily in the stock of thesponsoring employer?

a. ESOP


c. Master Limited partnership

d. Spin-off

48. The reorganization of thefinancial assets and liabilities of acorporation in order to create themost beneficial financial

environment for the company isknown as……….

a. Financial restructuring

b. Organizational restructuring

c. Amalgamation

d. Internal reconstruction

49. At which stage the organizingor sponsoring group purchases allthe outstanding shares of thetarget company and takes itthrough stock purchases format.

a. Arrangement of finance

b. Going private

c. Restructuring

d. reverse leveraged buyouts50. Which of the following is highrisk subordinating debt and isregarded as a type of intermediatefinancing between debt and equityand an alternative to high yieldbonds?

a. Senior debt

b. Subordinated debt

c. Mezzanine Finance

d. Loan stock

51. Strategic alliance often takeplace between firms of differentindustries and of varied sizes, forvertical or horizontal links andconsolidation of positions . Whichone of the following does not comeunder the advantages of strategicalliance?

a. Gain a means of distribution inInternational market

b. Overcome legal or regulatorybarriers

c. Challenging competition

d. Diversification

52. What method of businessvaluation does concentrate oncash generation potential ofbusiness?

a. Asset accumulation

b. Discounted cash flow method

c. Market value

d. price earnings multiple valuation

53. What does contain observableand unobservable behaviouralrules, norms of work organisationand philosophies determining theintegral hierarches?

a. Faster Integration

b. Due Diligence

c. Corporate or organistionalculture

d. Starting the PMI process early.

54. What is the name of method ifthe consideration is computed byadding up the cash paid, agreedvalue o the securities allotted bythe transferee co. to the transferorcompany in discharge ofconsideration?

a. Net Assets method

b. Net payment method

c. Lump sum method

d. Intrinsic worth method55. What does generally involvethe acquisition of a certain block ofequily capital of the companywhich enables the acquirer toexercise control over the affairs ofthe company?

a. Take over

b. Amalgamation

c. Merger

d. Joint venture

56. Which is the primary Indian lawwhich regulates dealings in foreignexchange?

a. Income Tax Act, 1961

b. FEMA, 1999

c. Companies Act, 1956



d. Negotiable Instrument Act, 1881

57. What is the period limitation forresulting company to get benefitedfor another demerger?

a. 5 yrs.

b. 7 yrs

c. 10 yrs

d. 12 yrs.

58. What is called to the earningsor the target firm are projected anddiscounted at the acquirers cost ofcapital to obtain a theoreticalmarket price on the shares of thetarget company?

a. Present value analysis

b. Capital assets pricing

c. Cost of capital

d. Price earnings ratio

59. What does affect internationalmergers in a number of ways?

a. Foreign Exchange rate

b. Foreign Taxation

c. Foreign Govt. policy

d. Swap ratio

60. When IMS Health had enteredinto a definite agreement to be aacquired by Investment fundsmanaged by TPG capital and theCPP investment Board?

a. In Sept. 2009b. In Nov. 2009

c. In Dec. 2009

d. In Jan. 2010

SECTION C

61. X Ltd. is engaged inexploration and production ofmineral oil. It wants to merge withY Ltd. a company engaged inrefining and marketing. Suchmerger will lead to improvement in

coordination and control. Thisbenefit is raised due to

a. Economies of scale

b. Expansion

c. Tax shield

d. Economies of verticalintegration

62. Zebra Ltd. is having value ofRs 500 lakh and value of theElephant Ltd. is 180 lakh. If thetwo firms combine, the estimatedcost savings would have presentvalue of Rs 100 lakh. Zebra Ltd.will have to make payments equalto Rs 200 lakh while making theacquisition. What will be the NetGain from the Merger?

a. 70 Lakh

b. 80 Lakh

c. 90 Lakh

d. 100 Lakh

63. The two firms X Ltd. and Y Ltd.initially co-existing but graduallybecoming interdependent. Thesefirms need simultaneous protectionand permeability of the boundarybetween two firms. Such Post-

acquisition integration is knownas………..

a. Preservation

b. Holding company

c. Symbosis

d. Absorption

64. X Ltd. is an Indian company. YLtd. is a foreign company whichwants to enter the Indian market ofcheap taxable Y Ltd. hope to gainfrom X Ltd.'s experience toproduce cheap textile. X Ltd. andY Ltd. want to enter in suchcontract for a short duration. Suchcontract for corporate restructuringis known as...........

a. Joint venture

b. Sell-off

c. Spin-off

d. Master limited partnership65. 5 members from managementform a group to buy P Ltd. Theyare able to raise together $20,000and remaining amount will betaken from the bank. They will get

equity shares according to theircontribution. Such corporaterestructuring method is knownas……

a. Leverage buyouts


c. Master limited partnership

d. Employees stock ownershipplans

66. Wal-mart a U.S. retailingcompany wants to enter in theIndian market with BhartiEnterprises Ltd. by making acommercial arrangement. Both ofthe company have made a properarrangement for profit sharing andperiod of this arrangement. Thisarrangement is known as…….

a. Joint venture

b. Partnership

c. Merger

d. Licensing

67. Nature Ltd. acquires Earth Ltd.Nature Ltd. determines the valueof Earth Ltd. by multiplying thequoted share price of company bythe number of issued shares. Themanagement of Nature Ltd. thinksthat the quoted price of sharereflects the investors' perceptionsabout the performance of thecompany therefore, it is the bestmethod of valuation of Earth Ltd.Which of the following method isused by Nature Ltd. for valuationof Earth Ltd.?

a. Asset accumulation method

b. Discounted cash flow method

c. Market value method

d. Price earning multiple valuation



68. X Ltd. a software makingcompany acquires Y Ltd. also inthe same business. But both of thecompanies have different workculture. X Ltd. gives liberty to i tsemployees to makerecommendations about themanufacturing process and they

have freedom to participate in thedecision making but in Y Ltd. allthe decisions are taken at thehigher level of management. Theacquisition does not appear verysuccessful. What is the reason offailure of this acquisition?

a. Due Diligence

b. Financingc. Complementary Resources

d. Cultural and managementdifferences

69. ABC Ltd. purchases thebusiness of XYZ Ltd. The assets ofXYZ Ltd. are as follows: GoodwillRs. 2 lakh, Stock Rs. 5 lakh,Debtors Rs. 1 lakh, Plant &Machinery Rs. 2 lakh and buildingRs. 2 lakh. There are creditors ofRs. 2 lakh. The consideration isdischarged in the form of 90thousand fully paid equity sharesof Rs. 10 each and balance incash. Which of the followingmethod has been followed forcalculation of purchase

consideration?

a. Net assets method

b. Lump sum method

c. Net payment method

d. Intrinsic worth method

70. X Ltd. wants to defend itselffrom a hostile bidder Y Ltd. Toexecute its defense, X Ltd. grantsall shareholders-except theacquirer - options to buy additionalstock at a dramatic discount. Thisdilutes the Y Ltd's share andintercepts its control of thecompany. Such type of defenseagainst takeover bid is knownas............

a. Poison pills

b. Divestiture

c. White Knight

d. Greenmail

71. X Ltd. has passed a resolutionfor acquisition of Y Ltd. which isinvolved in textile business. The

object clause of X Ltd. permitssuch business. It has been informthe X Ltd. and Y Ltd. to the stockexchange and board of directorshas also approved the acquisition.

After approval of shareholders andcreditors what should be done byX Ltd. to acquire Y Ltd.?

a. Permission for acquisition

b. Approval of board of directors

c. Approval of central government

d. Sanction by the High court

72. Wipro Ltd. desires to sell itsvanaspati oil making division dueto its underperformance. This is aloss making division whichdecreases the resources of thecompany. Wipro Ltd. has expertisein making software hence,vanaspati making division is not itscore business. Such arrangementis called..........a. Spin-off

b. Split-off

c. Split-up

d. Divestiture

73. X Ltd. desires to acquire Y Ltd. After consideration themanagement of both companieshave decided that exchange ratiofor the merger on the basis ofstock exchange prices of theshares both the companies. Toavoid distortion in the market priceat the time of deal, which marketprice should be taken intoconsideration?

a. Market price beforecommencement of negotiations

b. Market price afterannouncement of takeover

c. Market price on a particular datefixed by government

d. Market price on the date oftakeover

74. Tata motors acquired Jaguarmaking unit from Ford motors.Jaguar is a luxury car. Tata motorsgenerally make cheap cars.

Analysts think that this willdecrease the brand value ofJaguar. The fear of decrease inbrand value arises due to…………..

a. Environmental opportunities andthreats

b. Global mindset

c. Decrease in cost

d. Increase in cost

75. Thailand is going through apolitical turmoil. All the exportersfear to supply goods to thiscountry. People don't think thatthere will be a stable governmentin the near future. Experts say thatthis can affect the paymentcommitments also. Which of thefollowing factor affects the exportto Thailand?

a. External advantages indifferential products

b. Role of government policies

c. Exchange rates

d. Lack of political stability

Documents

MF0011_Merger.docx