Questions Septermber 2007 Examination

1. Discuss briefly the motives behind acquisition of businesses and companies by existing companies and describe briefly the types of acquisitions that they make to satisfy the specific motives.

2 What is due diligence? Explain important steps in it.

Due diligence begins with legal aspects and extends to business and management considerations.

Lawyer's definition:"A process of enquiry and investigation made by a prospective purchaser in order to confirm that it is buying what it thinks it is buying."

Dealmakers view: Due diligence is about reducing transactional risk. due diligence helps to identify issues that feed into price negotiations, and hence reduce the risk of paying too much; It helps to de-risk the deal by identifying points against which legal protection should be sought.

Definition of CDD: CDD is a mini-strategy review that is carried out by acquirers of companies to:

- confirm that the company they are buying has the commercial prospects they think it has;
- help plan integation;
- show how to position an acquisition or the combined entity for maximum value.

3. What are the provisions of Income tax Act regarding income from business and profession? Examine their relevance when a company is acquiring another company.


4. Explain the provisions of accounting standard AS-14.

5.What is strategy? According to Michael Porter, what are the steps in strategy formulation? How do acquisitions support Michael Porter’s conception of strategy?

6. Give a brief account of steps involved in initiating and completing a merger in India.

7. Describe the important points in SEBI Guidelines regarding takeover in India.

8. Explain the important steps to be taken up by a company to successfully integrate an acquired unit with its operations.

9. Describe briefly various theories put forward in the area of acquisitions and mergers.

10. Explain any two empirical studies that were done in the area of acquisitions and mergers.

11. Discuss the reasons why companies divest some divisions and discuss any one empirical study on the performance of companies and that divested the divisions and companies that acquired the divisions.