questions for mba mergers amp acquisitions

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Chapter 4 Discussion Questions:

Answer any five of the following questions:

  1. Discuss how you would use information obtained from the external, internal, and opportunities/threats identification analyses conducted during the business planning process to select an appropriate business strategy. Be specific.
  2. Discuss how you would select the appropriate implementation strategy. Be specific. (Hint: Consider the resources—broadly defined–required/currently available to exploit potential opportunities and threats.)
  3. Why might Adobe have decided to acquire Omniture rather than to partner with Omniture or to build a similar capability on its own?
  4. What considerations might have made Omniture an attractive acquisition target for Adobe?
  5. Identify at least 3 criteria that might be used to select a manufacturing firm as a potential acquisition candidate? A financial-services firm? A high-technology firm?
  6. Despite weeks of sometimes heated negotiation, the seller continues to insist on a purchase price that is $5 million more than the potential buyer is willing to pay. How can the buyer and seller close the “price gap?” Be specific.
  7. Following due diligence, the buyer is concerned about the outcome of pending litigation facing the seller. The potential impact over the next three years if the firm were to lose the lawsuits could be as high as $4 million. How can the buyer protect herself against this potential liability if she acquires the target firm?
  8. The CEO of the acquiring firm insists that the integration of the target firm must be completed as rapidly as possible in order to realize the full value of estimated synergies. Why might the CEO feel this way? What are the risks associated with a rapid integration of the target firm into the acquirer? What are the risks of a slow integration of the target firm into the acquirer?
  9. The CEO of a small start-up firm has just been contacted by a potential acquirer, who is offering to buy the firm for a very attractive purchase price. However, the CEO refuses to provide any data on her firm until the potential buyer provides her with three years of signed Federal income tax statements, personal bank statements, and a net worth statement. Why? Is the CEO being reasonable? What alternatives does she have if the buyer refuses to provide this information?

Chapter 5 Discussion Questions :

Answer any three of the following questions:

  1. Identify several criteria that might be used to select a manufacturing firm as a potential acquisition target? A financial-services firm? A hi-tech firm?
  2. Describe how the various activities that occur concurrently during the negotiation process affect the determination of the final purchase price for the target. Be specific.
  3. What is the purpose of the buyer and the seller performing due diligence? What other parties might want to perform due diligence on the target firm?
  4. Describe the financing plan. In what sense is it a “reality check?”
  5. Of the various activities conducted during post-closing integration, which do you believe is the most important and why?

Chapter 6 Discussion Questions:

Answer any three of the following questions:

  1. Why is the pace with which businesses are integrated important? Be specific.
  2. Why is it critical to make the tough decisions about who to put in key management positions early in the integration effort?
  3. Why are firms likely to lose customers during the integration period?
  4. Identify the main challenges of developing a new organization for the combined businesses. How would you attempt to resolve these challenges? Be specific.
  5. What are the common methods for integrating corporate cultures? Of these, which do you believe would be the most important? Explain your answer.

Chapter 7 Discussion Questions and Problems:

Answer the questions below:

  1. Answer any two of the following questions:
    1. How does the size of the firm affect its perceived risk? Be specific?
    2. How would you estimate the beta for a publicly traded firm? For a private firm?
    3. Explain the difference between equity and enterprise cash flow?
    4. What is the appropriate discount rate to use with equity cash flow? Why? With enterprise cash flow? Why?
  2. Abbreviated financial statements are given for Fletcher Corporation in the following table:

2015

2016

Revenues

$640

$700

Operating expenses

530

600

Depreciation

16

20

Earnings before interest and taxes

65

75

Less Interest Expense

6

6

Less: Taxes

24

27

Equals: Net income

36

40

Addendum:

Yearend working capital

160

220

Principal repayment

28

26

Capital expenditures

30

20

Yearend working capital in 2014 was $156 million and the firm’s marginal tax rate is 40% in both 2015 and 2016. Estimate the following for 2015 and 2016:

  1. Free cash flow to equity.
  2. Free cash flow to the firm.

3. Free cash flow to equity last year was $5 million. It is expected to grow by 25% in the current year, at a 20% rate annually for the next five years, and then assume a more normal 5% growth rate thereafter. The firm’s cost of equity is 10% and weighted average cost of capital is 8% during the high growth period and then drop to 8% and 6%, respectively, during the normal growth period. What is the present value of the firm to equity investors (equity value)? If the market value of the firm’s debt is $15 million, what is the present value of the firm (enterprise value)?

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