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Questions:

5. Study the role of top management in the success of a merger6. Examine the synergies of merger between Morgan Stanley and Dean Witter

Section B

Multiple Choice Questions (MCQ)

[Please answer allthe following questions]

1. An independent company carved out of another company through a sale is called___________.

A) mergerB) spin offC) TakeoverD)None of the above

2. Acquisition is also known as a ______________.A) MergerB) ConsolidationC) TakeoverD) Absorption

3. _________________ is considered a dubious reason for merger.A) DiversificationB) Earnings GrowthC) Lower Financing CostsD) All of the above

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4. Merger through ______________ is grouping of two or more companies into an existingcompany.

A) AbsorptionB) ConsolidationC) Vertical integrationD) Horizontal integration

5. The first stage of any merger or amalgamation must be a thorough review by eachorganization of the other, which is commonly known as the _________________process.

A) Business valuationB) Planning ExitC) Due diligenceD) Business deal

6. The basic purpose of valuation of target companies is to___________________________.

A) identify a management teamB) locate possibilities of takeoverC) sell-off shares to new companyD)None of the above

7. _____________ approach provides a superior theoretical framework as it also factors therisk.

A) Present value analysisB) Capital assets pricingC) Future value analysisD)None of the above

8. Share exchange ratio is generally determined by the relative __________ strength of thetwo companies.

A) financialB)bargainingC) managementD) share value

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9. On successful conclusion of negotiations, the two companies announce an agreement tomerge, which leads to the fifth and final phase called ______________.

A) documentationB) integrationC) negotiationD) valuation

10.A takeover generally involves the acquisition of a certain block of _____________ whichenables the acquirer to exercise control over the affairs of the company.

A) machineryB) cashC) equity capitalD) All of the Above

11.Synergy refers to a situation where the combined value of a merger is more than the_______ of the values of merging firms

A)productB) sumC) differenceD) quotient

12.___________________________ results from the merger, enabling the combined firm tobecome more cost efficient and profitable

A) Greater pricing powerB) Higher growthC) Economies of ScaleD) Combined functional strengths

13.Greater pricing power resulting from reduced competition and greater market shareshould lead to higher profit margins and ________________.

A) operating incomeB) managerial strengthsC) dividendsD) equity capital

14.Synergy = Economic Advantage =?A) GainingB) Cost of Merger

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C) Value of Combined FirmD)None of the above

15.Diversifying indicates _____________ of company's business.A) ExpansionB) ContractionC) Change of OwnershipD) Change of Corporate Control

16.Refocus refers to concentrating on core business, meaning _____________________.A) ExpansionB) ContractionC) Change of OwnershipD) Change of Corporate Control

17.____________________ is a combination of subsets of assets contributed by two or morebusiness entities

A) Sell-offB) Spin-offC) Joint VentureD) Divesture

18.In a spin-off there is __________ of controlA) sharingB) separationC) independenceD) subsidiary

19.Demerger may allow companies to strengthen their __________________ and realise thetrue value of their business.

A) managementB) cash flowC) core businessD)policies

20.Leveraged buyouts are cash transactions where cash is borrowed by the acquiring firmand the debt financing represents ______ or more of the purchase price.

A) 70%B) 51%

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C) 75%D) 50%

21.Although subordinated debt have stringent reporting requirements, they are_____________ with a looser covenant package in comparison to senior debt

A) fixed rateB) can be publicly tradedC) offer long term securitiesD) All of the above

22.Generally the _________ assets of the target company are used as security for borrowingby the acquiring firm.

A) transferredB) intangibleC) tangibleD) unused

23.The debt that is at the topmost rank amongst all the other debts and equity capital in thebusiness is _____________.

A) loan stockB) subordinated debtC) senior debtD)preference share

24.In a ___________________ the businesses are not in direct competition, but have similarproducts or services that are directed towards the same target market.

A) PartnershipB) Joint ventureC) Strategic AllianceD) Licensing agreement

25.One of joint ventures rationale is to gain ___________ or raw material supply-chains.A) distribution channelsB) marketing advantageC) financial goalsD) All of the above

26.Joint ventures are seen as simpler and more _____________ forms of organizingexpansion of business compared to mergers and acquisitions.

A) FixedB) Flexible

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C) ComplexD) Any of the above

27.The term Joint Venture is an umbrella term which describes the _____________arrangement between two or more economically independent entities.

A) commercialB) strategicC) dubiousD) management

28.Income tax benefits are given to Industries set up as _______ export-oriented units, or inexport processing zones.

A) 100%B) over 75%C) over 50%D) over 25%

29.The joint venture between Walmart Stores and ________________ marked the entry ofWalmart into the Indian retailing industry.

A) Essar CommunicationsB) Vodafone IndiaC) Bharti EnterprisesD) Airtel India

30.Absence of excessive fluctuations in the _________ economy is referred as EconomicStability

A) microB) macroC) megaD) mixed

31.A ____________________ is a transaction in which an expanding firm buys either acontrolling interest or all of an existing company in a foreign country.

A) foreign investmentB) merger or acquisitionC) cross-border mergerD) cross-border acquisition

32.The internalization decision is similar to a _____________ decision.

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A) make-or-buyB) mergerC) takeoverD) sale-of-assets

33.The ownership decision has two dimensions: asset __________ and asset augmenting.A) sellingB)buyingC) exploitingD) financing

34.The lead institutions would be responsible for ensuring compliance with the code relatedto a ________ takeover.

A) hostileB) friendlyC)bailoutD) reverse

35.Exercising the ________ makes the acquisition very expensive to the bidder.A) White KnightB) Poison PillC) Green mailD) Lobster Trap

36.___________acquisitions are normally friendly because boards usually reflect the mind-set of the shareholders.

A) PublicB) InternationalC) PrivateD) All of the above

37.A share allotted to members of the transferor company does not attract ________Tax.A) restructuringB)profit from selling sharesC) capital gainsD) sales

38.Buying back shares from the open market at a premium over the market price is the beststrategy to maintain the share price in a ______ run.

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A)bullB)bearC) ratD) tiger

39.In case of buyback of shares, a postal ballot is opted for by a _________ company.A) listedB) unlistedC) Any company registered under Indian Companies Act.D) Postal ballot cannot be opted for any company

40.Certified true copies of the Court order on amalgamation will be filed with the CompanyLaw Board.(True/False)

A) TrueB) False

41.In amalgamation as merger, all assets and liabilities of the transferor company become orget transferred as, _______________ of the transferee company.

A) the reserveB) the assets and liabilitiesC) complementary resourcesD) Capital Fund

42.Pooling of interests method of accounting refers to the adding together of_______________ of the merging entities.

A) assets and liabilitiesB) synergiesC) interestsD) All of the above

43.In _____________ method, consideration is computed by adding the agreed values of allthe assets taken over by the transferee company and deducting there from the agreed

values of the liabilities taken over by the transferee company.

A) Lump sum methodB)Net assets methodC)Net payment methodD) Intrinsic worth method

44.Purchase consideration implies the value agreed upon for the ____________ taken over.

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A) goodwillB) equitiesC) net assetsD) cash reserves

45.Market approach of valuation is similar to the ___________________ method which ismostly used in real estate appraisal.

A) market-basedB) asset-basedC) comparable salesD) excess-earnings method

46.Reproduction value is a basis which is a variation of _________, and calculates cost ofconstructing a similar block of assets.

A) cost valueB) fair valueC) net book valueD) consideration value

47.____________ method is good for negotiated bargaining when plant, machinery andother assets are important considerations in the acquisition.

A) cost valueB) fair valueC) net book valueD) substitution value

48.Focusing on common factors and isolating diversities result in successful integrationstrategy. (True/False)

A) TrueB) False

49.Alignment of _________ can be achieved through information sharing, emphasizingsimilarities and mitigating dissimilarities through effective communication.

A) financesB) managementC)profitsD) cultures

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50.With regard to combinations, if there is no integration plan, it will cause ____________,both internally and externally.

A) lossesB) demergerC) uncertaintyD) All of the above

51.Creditors of ________ firms enjoy better protection than those of __________ firms.A) independent, mergedB) merged, independentC) demerged, independentD) independent, demerged

52.____________ and____________ are the two kinds of vertical integration.A) Forward, backwardB) Front-end, back-endC) Dependent, independentD)None of the above

53.The earnings of the target firm are projected and _______ at the acquirers cost of capitalto obtain a theoretical ___________ of the shares of the target company.

A) discounted, selling priceB) undiscounted, cost priceC) undiscounted, selling priceD) discounted, market price

54.The basic logic behind the model is that if expected rate of return, considering the riskelement, _______ the required rate of return, the target company is a ___________.

A)precede, bad buyB) exceeds, bad buyC) exceeds, good buyD)precedes, good buy

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55.Achievement of the objectives depends both on the ____________ and ___________validity of the strategy.

A) conceptual, empiricalB) cultural, authorizedC) conceptual, authorizedD) cultural, empirical

56.The ____________ perspective is based on hard economic, strategic and ____________evaluation of the acquisition proposal and the potential value creation.

A) rational, financialB)process, managerialC) rational, managerialD)process, financial

57.In the fragmentation stage, the twin problems of _________ and _________ areovercome by the entrepreneur.

A) innovation, inventionB) innovation, management teamC) invention, financeD) finance, management team

58.In the stage of maturity the competition in the industry is rather aggressive because thereare many ____________ and ________________________.

A) competitors, stakeholdersB) decisions, staffC) decisions, product substitutesD) competitors, product substitutes

59.Restructuring can be selling or closing of ___________ divisions from its core business,thereby achieving ______________ and a stronger balance sheet.

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A) any, staff reductionB) random, lower costsC) unprofitable, lower costsD) unprofitable, staffing reduction

60.In organizational restructuring, the focus is on _____________ and______________________ structures.

A) management, internal corporate governanceB) finance, internal corporate governanceC) management, staffingD) d. finance, staffing

61.No _________________ is involved in a demerger, it is a unique mode of________________.

A) cash transaction, divesting assetsB) stock transfer, divesting assetsC) cash transaction, profit sharingD) stock transfer, profit sharing

62.Large institutions are often _________ to hold shares in spin-offs due to the smallermarket capitalization, _________ risk, or poor financials of the new company

A) allowed, decreasedB) forbidden, increasedC) allowed, increasedD) forbidden, decreased

63.In MBO, _____________ of the company buys the company, and they may be joined by____________in the venture.

A) shareholders, employeesB) management, employeesC) employees, shareholders

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D) employees, public

64.LBO is a financing technique of purchasing a __________ company with the help of_____________.

A)private, debt capitalB)public or private, cashC)public or private, debt capitalD)public, cash

65.Before embarking upon the joint venture, a __________ owner should examine therelative advantages and disadvantages of the other methods for _________________

entry.

A) technology owner, foreign marketB) employees, local marketC) technology owner, local marketD) stock holders, local market

66.In is important to distinguish a ______________ from a contractual undertaking by twoor more parties to ____________ on and perform a specific task or one-time project.

A)joint venture, demergeB) strategic alliance, demergeC)joint venture, collaborateD) strategic alliance, collaborate

67.Emirates Telecommunications Corp is popularly known in the corporate world as_______________. In India largest share of M & A is found in ____________ industry.

A) Essar group, Information TechnologyB) Essar group, TelecommunicationC) Etisalat, Information TechnologyD) Etisalat, telecommunication

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68.The key opportunities can be the rise in ________________ and earnings and the keythreats can be fear of _____________ and cultural dissonance.

A)profits, imbalanceB)productivity, failureC)profits, failureD)productivity, imbalance

69.A person, who has more than ________% of the shares, can do a creeping acquisition ofup to _______% per year without triggering open offer requirements.

A) 25, 5B) 15, 5C) 25, 10D) 15, 10

70.Lobster Trap is a method used by a company wherein anyone with more than ____%ownership is prevented from converting securities into _____ stock.

A) 10, votingB) 15, sellingC) 10, sellingD) 15, voting

71.In __________ method, the amount at which the asset or the liability appears in the booksof the transferor company is considered to be the _________ value.

A) intrinsic value, marketB) net payment, agreedC) net assets, agreedD) lump sum, market

72.In intrinsic worth method, ______ are ownership securities, and if the transferee companypays for all the shares of the transferor company, it can be said to have paid for ________

business of the transferor company.

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A) cash, partialB) cash, entireC) shares, partialD) shares, entire

73.Asset accumulation approach is based on the principle that the property, plant andequipment of the company can be ___________ and the net proceeds would accumulate

to the _________ of the company once the companys liabilities are paid off.

A) merged, reservesB) liquidated, equityC) merged, equityD) liquidated, reserves

74.Income-based approach determines fair market value by multiplying the_______________ generated by the target company times a _____________.

A) net profit, capitalizationB) net profit, market valueC)benefit stream, market valueD)benefit stream, capitalization

75.Integration plan can be defined as a strategy with a _______ timeframe to work out theprocess and systems of the combination of businesses to realize the optimum value of all

____________ from the collaboration.

A) fixed, synergiesB) variable, goodwillC) fixed, goodwillD) variable, synergies

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