MODEL QUESTION PAPER SUBJECT CODE : MF0011 SUBJECT : Mergers and Acquisitions SECTION A 1.

The consequence of larger size and greater earnings stability of merged firm is .. a. Diversification

b. Financial synergy c. Managerial synergy d. Marketing Synergy

c. A firm sells shares in the market to create a new company d. A firm is broken in two parts

6. Economies of scale allows firm to become a. Cost efficient and profitable b. Costly and non-profitable

11. The corporate restructuring process in which parent company sells its shares in subsidiary to outsider is known as.. a. Joint venture b. Sell-off c. Spin-off d. Equity carve out. 12. Which of the following method of corporate restructuring is questioned on the basis of management can have unfair advantage in negotiations? a. Divestures b. Sell-off

b. Lower financing cost c. Profitable c. Earnings growth d. Cost effective d. Managerial effectiveness 7. Which of the following is the first step of merger process? 2. Merger of companies engaged in unrelated business is called.. a. Horizontal merger b. Vertical merger c. Circular combination' d. Conglomerate d. Management buyouts 3. Increase in efficiency through sharing of resources and technology and elimination of needless duplication is the key of.. a. Strategic benefits b. Economies of scale c. Complementary resources d. Utilization of Surplus funds 9. Merger is a special type of a. Working capital decision 4. Those synergies that allow firms to increase their operating income from existing assets are called a. Operating synergy b. Financial synergy c. Managerial synergy d. Market 10. Divesture means transaction through which a. A firm sells a portion of its assets or a division to other company b. A firm sells all of its assets to other company b. Dividend decision c. Capital budgeting decision d. Portfolio decision 14. In which method of corporate restructuring employees is usually given a share of the corporation after a certain length of employment or they can buy shares at any time? a. Leveraged buyouts b. Management buyouts c. master Limited partnership d. Employee stock ownership plans 8. Due diligence is .. Of proposed merger a. very detail investigation b. very extensive c. very detail and extensive d. very detail discussion 13. Which of the following is the riskiest part of a LBOs capital structure? a. Senior debt b. Subordinate debt c. ordinary shares d. Loan stock c. Evaluation and structuring the offer d. Due diligence and documentation a. Set the objective b. The selection criteria

c. Spin-off

5. The synergy that allows firms to increase growth is called.. a. Operating synergy.

15. When a group of managers buy the business they work in from its existing buyers, it is called

a. Leveraged buyouts b. Management buyouts

20. What is the name of valuation which is based on simple rate of return on capital employed? a. Assets value

c. Master limited partnership b. Market value d. Employee stock of ownership plans c. Capitalized earnings d. Cost value 16. Which business does have the key rational to diversify risk? a. Partnership b. Joint Venture a. Assets value c. Proprietorship b. Capitalized earnings d. Mutual concern c. Cost value 21. What is the value quoted for listed company's share at the stock exchanges?

25. How much equity shareholders of transferor company should become equity shareholders of the transferee company by virtue of the amalgamation in case of amalgamation in the nature of merger as per As - 14? a. 70% b. 80% c. 90% d. 100%

26. What does refer to uniting of interest? a. Interest due b. Interest received

17. What is necessary for every proposed joint venture? a. Identifying objectives b. Selecting a partner c. Choosing the business form d. Identifying legal problem

d. Market value c. Interest paid 22. What may be one of the most urgent and compelling challenges facing business today for improving the acquisition? a. Integration process b. Valuation process d. Pooling of Interest

27. What method of consideration is called of A Ltd. takes over the business of B Ltd. for Rs. 50 lacs? a. Net Assets method b. Lump sum method c. Net payment method d. Intrinsic worth method.

18. Which one of the following is not are the key rational behind the joint ventures? a. To augment insufficient financial or technical ability to enter a particular line or business. b. To share technology & generic management skills in organization, planning & control c. To obtain distribution channels or raw materials supply d. To extend activities with larger investment than if done independently 19. What approach to business valuation is rooted in the economic principle of competition? a. Assets based approach

c. Contract process d. Payment process

23. The people who focus on the short-term benefits from mergers and acquisition such as cost reduction are known as a. Merging company b. Resulting company

28. What can be triggered by a target company when a hostile suitor acquires a predetermined percentage of co. stock? a. Divertiture

c. Stakeholders b. White Knight d. Lenders c. Poison pills scheme d. Golden parachutes 24. What are conveniently blamed when mergers go bad? a. Cultural problems b. Planning problems b. Income approach c. Integration problems c. Market approach d. Problem of Due Diligence d. Divided approach c. Golden parachutes b. Divestiture a. poison pills 29. What is the name of a defensive strategy in which the target company's management may seek out a friendly acquirer?

d. White Knight

d. Winding-up 35. ...is worked out on the basis of past data of the company? a. Fair price b. Market price c. Breakup value d. Net Assets value

c. $ 2.9 million d. $ 3.1 millon 40. In which year Merick KGaA acquired all outstanding shares of common stock of minipore? a. Feb. 2009 b. Feb. 2010 c. March 2010 d. April 2010 SECTION B

30. What is the name of takeover if the board rejects the offer, but the bidder 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 the company to increase prometers holding? a. Issue Right shares b. Issue Bonus shares c. Buy back of shares d. Make new issue

36. In which type of share exchange ratio price earnings ratio of both the offer and offered companies will be compared to fudge relative growth prospectus? a. Market price b. Dividend payout ratio c. Price Earnings ratio d. Debt-Equity ratio

41. Who get the advantage of increasing the size of the company, restructuring of the financial composition of the company after mergers and acquisitions? a. Shareholders b. Promoters c. Managers d. Consumers

32. How much percentage of shares or voting rights can acquired without making a public offer? a. 10%

37. What does affect the success of cross-border mergers and acquisitions? a. Consideration

b. 15% b. Global mindset c. 20% c. Swap ratio d. 25% d. Agreement 33. What is a transaction in which a company, spin off all of its subsidiaries to its shareholders & ceases to exist? a. Spin-off b. Equity caverout c. Split-off d. Merger 34. What does result in the transfer by a company of one or more of its undertakings to another company? a. Merger b. Amalgamation a. $ 2.7 million c. Demerger b. $ 2.8 million

42. Two companies A Ltd. and B Ltd. combined to gain certain economies from the larger volume of operations, intensive utilization of production capacities and distribution network. Such benefits are raised due to a. Economies of scale b. Expansion

38. What is called to price of one country's money in relation to anothers? a. Money Inflation b. Money devaluation c. Exchange rate d. Pricing policy

c. Integration d. Tax shield

43. Combination of two firms where one is having excess cash with other having excellent investment opportunities is an example of a. Operating synergy

39. What was the purchase consideration of Imperial Engergy Plc which was acquired by the oil and Natural Gas Corp. in January 2009?

b. Managerial synergy c. Financial synergy d. Economies of scale

44. When two organizations have similar cultures, systems, management processes and structures, such type of building block for the creation of synergy is known as. a. Strategic compatibility b. Organizational compatibility c. Managerial Actions d. Value creation

environment for the company is known as. a. Financial restructuring

a. Asset accumulation b. Discounted cash flow method c. Market value

b. Organizational restructuring d. price earnings multiple valuation c. Amalgamation d. Internal reconstruction 53. What does contain observable and unobservable behavioural rules, norms of work organisation and philosophies determining the integral hierarches? a. Faster Integration b. Due Diligence a. Arrangement of finance b. Going private c. Corporate or organistional culture d. Starting the PMI process early.

45. Measurement of historical performance of existing business and determination of expected return is done in the following process: a. Set the objective

49. At which stage the organizing or sponsoring group purchases all the outstanding shares of the target company and takes it through stock purchases format.

c. Restructuring b. The selection criteria and information collection c. Evaluation and structuring the offer d. Due diligence and documentation d. reverse leveraged buyouts 50. Which of the following is high risk subordinating debt and is regarded as a type of intermediate financing between debt and equity and an alternative to high yield bonds? a. Senior debt 46. Which of the following types of Post-acquisition integration require high degree of strategic interdependence? a. Preservation, synergy b. Holding co., synergy c. Synergy, Absorption d. Holding co., Absorption 51. Strategic alliance often take place between firms of different industries and of varied sizes, for vertical or horizontal links and consolidation of positions . Which one of the following does not come under the advantages of strategic alliance? a. Gain a means of distribution in International market b. Overcome legal or regulatory barriers c. Challenging competition c. Master Limited partnership d. Diversification d. Spin-off

54. What is the name of method if the consideration is computed by adding up the cash paid, agreed value o the securities allotted by the transferee co. to the transferor company in discharge of consideration? a. Net Assets method

b. Subordinated debt b. Net payment method c. Mezzanine Finance c. Lump sum method d. Loan stock d. Intrinsic worth method 55. What does generally involve the acquisition of a certain block of equily capital of the company which enables the acquirer to exercise control over the affairs of the company? a. Take over b. Amalgamation c. Merger d. Joint venture

47. Which of the following is a qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer? a. ESOP b. Management buyouts

56. Which is the primary Indian law which regulates dealings in foreign exchange? a. Income Tax Act, 1961

48. The reorganization of the financial assets and liabilities of a corporation in order to create the most beneficial financial

52. What method of business valuation does concentrate on cash generation potential of business?

b. FEMA, 1999 c. Companies Act, 1956

d. Negotiable Instrument Act, 1881

coordination and control. This benefit is raised due to a. Economies of scale b. Expansion c. Tax shield d. Economies of vertical integration

c. Spin-off d. Master limited partnership 65. 5 members from management form a group to buy P Ltd. They are able to raise together $20,000 and remaining amount will be taken from the bank. They will get equity shares according to their contribution. Such corporate restructuring method is known as a. Leverage buyouts b. Management buyouts c. Master limited partnership d. Employees stock ownership plans

57. What is the period limitation for resulting company to get benefited for another demerger? a. 5 yrs. b. 7 yrs c. 10 yrs d. 12 yrs.

58. What is called to the earnings or the target firm are projected and discounted at the acquirers cost of capital to obtain a theoretical market price on the shares of the target company? a. Present value analysis

62. Zebra Ltd. is having value of Rs 500 lakh and value of the Elephant Ltd. is 180 lakh. If the two firms combine, the estimated cost savings would have present value of Rs 100 lakh. Zebra Ltd. will have to make payments equal to Rs 200 lakh while making the acquisition. What will be the Net Gain from the Merger? a. 70 Lakh

b. Capital assets pricing b. 80 Lakh c. Cost of capital c. 90 Lakh d. Price earnings ratio d. 100 Lakh 59. What does affect international mergers in a number of ways? a. Foreign Exchange rate b. Foreign Taxation c. Foreign Govt. policy d. Swap ratio a. Preservation 60. When IMS Health had entered into a definite agreement to be a acquired by Investment funds managed by TPG capital and the CPP investment Board? a. In Sept. 2009 b. In Nov. 2009 c. In Dec. 2009 d. In Jan. 2010 SECTION C 61. X Ltd. is engaged in exploration and production of mineral oil. It wants to merge with Y Ltd. a company engaged in refining and marketing. Such merger will lead to improvement in b. Holding company c. Symbosis d. Absorption

66. Wal-mart a U.S. retailing company wants to enter in the Indian market with Bharti Enterprises Ltd. by making a commercial arrangement. Both of the company have made a proper arrangement for profit sharing and period of this arrangement. This arrangement is known as. a. Joint venture b. Partnership c. Merger d. Licensing

63. The two firms X Ltd. and Y Ltd. initially co-existing but gradually becoming interdependent. These firms need simultaneous protection and permeability of the boundary between two firms. Such Postacquisition integration is known as..

64. X Ltd. is an Indian company. Y Ltd. is a foreign company which wants to enter the Indian market of cheap taxable Y Ltd. hope to gain from X Ltd.'s experience to produce cheap textile. X Ltd. and Y Ltd. want to enter in such contract for a short duration. Such contract for corporate restructuring is known as........... a. Joint venture

67. Nature Ltd. acquires Earth Ltd. Nature Ltd. determines the value of Earth Ltd. by multiplying the quoted share price of company by the number of issued shares. The management of Nature Ltd. thinks that the quoted price of share reflects the investors' perceptions about the performance of the company therefore, it is the best method of valuation of Earth Ltd. Which of the following method is used by Nature Ltd. for valuation of Earth Ltd.? a. Asset accumulation method b. Discounted cash flow method c. Market value method d. Price earning multiple valuation

b. Sell-off

68. X Ltd. a software making company acquires Y Ltd. also in the same business. But both of the companies have different work culture. X Ltd. gives liberty to its employees to make recommendations about the manufacturing process and they have freedom to participate in the decision making but in Y Ltd. all the decisions are taken at the higher level of management. The acquisition does not appear very successful. What is the reason of failure of this acquisition? a. Due Diligence

c. White Knight d. Greenmail

d. Market price on the date of takeover

71. X Ltd. has passed a resolution for acquisition of Y Ltd. which is involved in textile business. The object clause of X Ltd. permits such business. It has been inform the X Ltd. and Y Ltd. to the stock exchange and board of directors has also approved the acquisition. After approval of shareholders and creditors what should be done by X Ltd. to acquire Y Ltd.? a. Permission for acquisition

74. Tata motors acquired Jaguar making unit from Ford motors. Jaguar is a luxury car. Tata motors generally make cheap cars. Analysts think that this will decrease the brand value of Jaguar. The fear of decrease in brand value arises due to .. a. Environmental opportunities and threats b. Global mindset c. Decrease in cost d. Increase in cost

b. Financing c. Complementary Resources d. Cultural and management differences

b. Approval of board of directors c. Approval of central government d. Sanction by the High court

69. ABC Ltd. purchases the business of XYZ Ltd. The assets of XYZ Ltd. are as follows: Goodwill Rs. 2 lakh, Stock Rs. 5 lakh, Debtors Rs. 1 lakh, Plant & Machinery Rs. 2 lakh and building Rs. 2 lakh. There are creditors of Rs. 2 lakh. The consideration is discharged in the form of 90 thousand fully paid equity shares of Rs. 10 each and balance in cash. Which of the following method has been followed for calculation of purchase consideration? a. Net assets method

72. Wipro Ltd. desires to sell its vanaspati oil making division due to its underperformance. This is a loss making division which decreases the resources of the company. Wipro Ltd. has expertise in making software hence, vanaspati making division is not its core business. Such arrangement is called.......... a. Spin-off b. Split-off c. Split-up d. Divestiture

75. Thailand is going through a political turmoil. All the exporters fear to supply goods to this country. People don't think that there will be a stable government in the near future. Experts say that this can affect the payment commitments also. Which of the following factor affects the export to Thailand? a. External advantages in differential products b. Role of government policies c. Exchange rates d. Lack of political stability

b. Lump sum method c. Net payment method d. Intrinsic worth method 73. X Ltd. desires to acquire Y Ltd. After consideration the management of both companies have decided that exchange ratio for the merger on the basis of stock exchange prices of the shares both the companies. To avoid distortion in the market price at the time of deal, which market price should be taken into consideration? a. Market price before commencement of negotiations b. Market price after announcement of takeover c. Market price on a particular date fixed by government

70. X Ltd. wants to defend itself from a hostile bidder Y Ltd. To execute its defense, X Ltd. grants all shareholders-except the acquirer - options to buy additional stock at a dramatic discount. This dilutes the Y Ltd's share and intercepts its control of the company. Such type of defense against takeover bid is known as............ a. Poison pills b. Divestiture