Neuro Pasta Case Analysis

That is when two strongs sensation profitable and one unprofitable merge together such(prenominal) that the loss of the one unshakable is off club by the opposite firm. Also, in certain situation conjugation alike helpful in increasing the debt capacity. 0 variegation Diversification exit create value by reduction in unsystematic risk. The firms get out diversify in order to move in to diametric businesses than what they are currently into. 0 Control Merger will assume to more than escort to the getting managements as they will be use the bigger management than ahead.However , the acquired firms manager whitethorn be asked to leave the firm. 0 Purchase of assets below replacement cost Merger female genitals besides happen in order to place the ageing assets or they fate to acquire more assets which are currently operating with full capacity. 0 Synergy This is the reason because of which most of the spinal fusions happen. Synergy will result in more value than the additive values of the acquiring and acquired firms ( V ABA VA +VI) From the pedestal of society, Most of the points are relevant to smart set like ICC.As Icily whitethorn look for diversification, that is they are currently into Indian and Chinese cuisine however the merger will help them to diversify into Italian cuisine. Also synergy effects will be there which will ICC. Sections, Group 2 3 hospitable Merger Hostile Merger Friendly merger happens when twain the Both the firms will not be receptive acquiring company and target companies are receptive. Merger will happen through the agreement In head-on merger the acquiring company will use between the two companies. Lot of techniques to gain the control over the target company as they will not be agreeing for the merger.Acquiring firm uses techniques like proxy fights, tender tin to gain the originator. In hostile merger the acquiring company will allow tender offer in order to acquire biding more than the actual value of stock. This money bid by the acquiring company will be more than the actual value of the share in order to gain power is the premium. Sections, Group 2 4 During the time of merger or acquirement, the matter to expense is not tax effective which means taxation government activity may take a look as if it is for tax avoidance.This also means to take care that the profits of the parent company are not subsided by showing the interest expense of the target company and vice versa. This is particularly applicable only at the time of acquisition and not later. Hence, it is added later explicitly. Retained earnings are something presented on the other side of currency in the balance sheet. It is not the actual cash which the company can use when its balance gets low. But, it is actually the stockholders claim which is seemingly seen as cash and hence it is not actually available to the company.A identical situation would prevent the authority suitor/bidder to think twice bef ore replacing the management Secondly, Enrons management can agree with the potential suitor on a mutually beneficial per share set which in turn would be level than the high price if the bidder were to go for a hostile merger or a takeover. They may negotiate with the potential suitor in the price per share with an intention of Log-rolling to benefit both the parties. Thirdly, as Enrons management should consider positioning itself not as scarcely a brand but as a Brand own by a trusted individual like CEO or a family. For e. G.It is not advertised that who owns Dominos and pizza hut because it is positioned in harm of pizza as a brand but we it is widely cognize who own has partnered Cataracts I. E. Data. B) Nero may adopt shareholder rights option, Golden parachute strategy as measures encouraged my Enrons management to Retire the Debt before the Acquisition and separate and equal amount of debt post-merger. This is because the stockholders can tire at a lower performer r ate and later can refinance to neutralize coinsurance effect. Also, they may think of Employee poisonous substance pill strategy as anti-take over strategy but it would be unethical at times.It can still be thought of positively by Just threatening the bidder by showing support and strength of relationship between Management and talented employees that if the unravel is broken, the target company may not be able to complete well in future. Sections, Group 2 8 c) Firstly, the terms and conditions should be seen that is the management being replaced while considering the lower offer? If not, then at least the managers are in benefit as they will still go in their positions. Also, they should negotiate for a higher compensation in stead for the lower bid.Still, if the bid is lower than our minimal expectation then we may think repurchasing shares from market showing confidence in our growth and future. This is will help the stock price rise and in turn energy the potential bidde rs to increase the bid price at least airless or supra the true value. Also, they may give a distinguish for a White Knight company to make a Friendly offer, further influencing the potential acquirer to increase the bid price. D) In the cutting as stated, the management is young and might want to have larger pie of the expected growth seeing which the acquirer has made a bid.In the initial stage itself, the target company (Nero) should make clear with the acquirer (ICC) to set the terms of retaining the management. The pillar strength should be clearly shown as the managerial ability of the Management and thus justifying Enrons position in retaining management seats. If things do not work out, they may go threaten with the inevitable Employee poison pill strategy which may be assumed to work in Enrons favor. Sections, Group 2 9 To give a tempting and regardless bid, we shall place our bid comparing by keeping our upper take a hop as expected ROE.As given in exhibit 2, the ROE commencement 1996 is consistently above 42% with expected 51% in 1999. Hence, we can place our bid starting 25% above the share price I. E. $ 1. 875 ? $1. 85 and have a target to settle till 40% above $1. 5 which is $ 2. 1 . Also, retaining the Enrons management below $2. 1 should be considered as an option which would be tempting for the Enrons managers exulting lesser obstacle towards acquisition. Also, retaining management would be dishes where experienced folks in initial human body would be an added advantage to get acquainted with the system. Action Group 2 10 Yes, we believe that Synergy in any form such as Tax benefit, Revenue increment, reduction in Operational expenses collectable to some communal operations will create value in an average completed merger. The value as mentioned above is created in by-line fours forms but not limited to only four combine revenue enhancement increase than the individual added ( Data motors JELL) Tax infinite due to Combined debt increase or increased Debt taking capacity due to lesser risk Reduction in Operational Costs due to implementing common facilities, common operations, cheap raw material in case of unsloped integration/expansion etc. Tech Maidenhair Astray) Reduction in capital required for maintaining same efficiency as today From the above mentioned benefits, depending on the type of merger, the source of value creation would change. Like whether it is upright piano integration (Supplier benefit), Horizontal integration (increase market share and higher control over prices in retain cases), conglomerate acquiring (for diversification) etc.