Finance_Corporate Restructuing and Valuation (CRV) — Winter 2021

Define the following terms:

Tender Offers

Transaction Analysis

ESHOPs

White knight & poison put

Reverse merger

LBO & MBO

Green mail & crown jewel

Explain the various approaches to corporate valuation in detail.

What do you mean by take over? Explain the benefits of takeover and its disadvantages in detail.

Define Corporate Restructuring. Explain various forms of corporate restructuring in detail.

What do you mean by takeover? Explain various anti takeover tactics/strategies.

Firm Ais planning to acquire Firm B. The relevant financial information of the two firms prior to the merger announcement are as follows: particulars Firm A Firm B Market Price per share Rs. 75 Rs. 30 Number of shares 1000000 500000 Market value of the firm 7,50,00000 1,50,00000 The merger is expected to bring gains which have present value of Rs.1.5 crore. Firm A Offers 250000 shares in exchanging for 5 lakh share to the shareholders of firm B. You are required to determine:

Total value of Firm AB (PVAB) after Merger (ii) Gains to the share holders of firm A (iii) True cost of acquiring Firm Band net present value of the merger to Firm B.

Explain the various motives and barriers for corporate restructuring

What do you mean by LBO and MBO? Explain the common characteristics of LBO and Motivation behind LBOs. Page 1 of

What do you mean by acquisition? Discuss the motives behind merger. How acquisition is different from takeover? Explain the various types of acquisition.

Company Xwishes to Take over the Company Y. The financial details of the two companies are as under: Particulars Company X Company Y Equity shares ( Rs. 10per 100000 50000 share) Shar premium account …….. 2000 P & Laccount 38000 4000 Preference shares 20000 ….. 10% debentures 15000 5000 total 173000 61000 Total Assets 173000 35000 Maintainable annual 24000 15000 profits(after tax) for equity shareholders Market Price per share 24 27 Price earnings ratio 10 9 Determine the exchange ratio for this take over.

Discuss the Divestiture in detail. Explain different forms of divestment

The Xyz Ltd. wants to Acquire ABC Ltd. by exchanging its 1.6for every share of ABC Ltd. It anticipates to maintain the existing P/Eratio subsequent to the merger also. The relevant financial data are as under: XYZ Ltd. ABC Ltd. Earnings after taxes (EAT)(Rs.) 1500000 450000 Number of equity shares outstanding 300000 75000 (N) Matket Price per share (MPS)(Rs) 35 40 What is the exchange ratio based on market prices? What is the premerger EPS and P/Eratio of each company? What is EPS of XYZ company after acquisition? What is expected market price per share of merged company? Page 2 of

The Hypothetical Limited wants to acquire Target Ltd. The balance sheet of Target Ltd. as on March 31st (current Year) has the following assets and Liabilities: (Rs. In Lakh) Liabilities Amount Assets Amount Equity share capital( 400 Cash 4 lakh shares of Rs. 100 each) Retained Earnings 100 Debtors 65 10.50% Debentures 200 Inventories 135 Creditors and other 160 Plant and 650 Liabilities Equipments Additional information:  The shares of Target Ltd. will get 1.5 shares in Hypothetical Ltd. for every share; the shares of Hypothetical Ltd. would be issued at its current market price of Rs. 180 per share. The debenture holders will get 11% debenture of the same amount. The external liabilities are expected to be steeled at Rs. 150 Lakh. Dissolution expenses of Rs. 15 lakh are to be met by the acquiring company.  The following are projected incremental Free Cash flows(FCFF) expected from acquisition for 6 years (Rs. Lakh): Year -end Rs. In Lakh1150  The free cash flow of Target Limited is expected to grow at 3% per annum, after 6 years.  Given the risk complexion of Target Limited, cost of capital for Target Limited cash flows has been decided at 13%  There is unrecorded liability of Rs. 20 lakhs

Determine Cost of acquisition of Target Limited.

What is the present value of FCFF?

Determine the PV of FCFF and Terminal Value.

Is it is assumed that the cost of acquisition is Rs. 900 Lakh, What is the value of Benefit of acquisition to the Hypothetical Limited. Page 3 of