Neuro Pasta Case Analysis

That is when two self-coloureds one profitable and one unprofitable merge together such that the loss of the one firm is offset by the other firm. Also, in certain situation Merger likewise helpful in increasing the debt capacity. 0 Diversification Diversification exit create observe by reduction in unsystematic bump. The firms result diversify in order to move in to different businesses than what they are currently into. 0 Control Merger leave lead to more control to the acquiring charges as they ordain be handling the bigger management than before.However , the acquired firms animal trainer may be asked to leave the firm. 0 Purchase of assets below re dedicatement cost Merger potty also happen in order to place the ageing assets or they want to acquire more assets which are currently operating with full capacity. 0 Synergy This is the reason because of which most of the mergers happen. Synergy will result in more value than the additive values of the acquiring and a cquired firms ( V ABA VA +VI) From the standpoint of society, Most of the points are relevant to comp any like ICC.As icily may 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 synergism effects will be there which will ICC. Sections, Group 2 3 Friendly Merger Hostile Merger Friendly merger happens when both the Both the firms will not be receptive acquiring company and target companies are receptive. Merger will happen through the agreement In hostile 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 offer to gain the power. In hostile merger the acquiring company will allow tender offer in order to acquire adjureing more than the actual value of stock. This money bid by the acquiring company wil l 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 acquisition, the interest expense is not tax effective which means taxation authorities 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 crime versa. This is particularly applicable only at the time of acquisition and not by and by. Hence, it is added later explicitly. Retained earnings are something presented on the other side of notes 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 apparently seen as cash and thereof it is not actually available to the company.A similar situation would prevent the potential suitor/bidder to regard twice before replacing the management Secondly, Enrons management can agree with the potential suitor on a mutually beneficial per share equipment casualty which in turn would be lower 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 win both the parties. Thirdly, as Enrons management should consider positioning itself not as Just a brand but as a Brand owned 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 wrong of pizza as a brand but we it is widely known who own has partnered Cataracts I. E. Data. B) Nero may adopt shareholder rights option, Golden parachute strategy as measures boost my Enrons management to Retire the Debt before the Acquisition and reissue and equal amount of debt post-merger. This is because the stockholders can tire at a lower performer rate and later can refinance to neutralize coinsurance effect. Also, they may think of Employee poison 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 knot is broken, the target company may not be able to fare 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 anyway the managers are in benefit as they will still comprise in their positions. Also, they should negotiate for a higher compensation in lieu 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 pushing the potential bidders to development the bid price at least near or above the true value. Also, they may g ive a call for a White nickname company to make a Friendly offer, further influencing the potential acquirer to increase the bid price. D) In the case as stated, the management is young and big businessman 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 constitute 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 irrespective bid, we shall place our bid comparing by keeping our upper limit as expected ROE.As given in exhibit 2, the ROE starting 1996 is consistently above 42% with expected 51% in 1999. Hence, we can plac e 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 restriction towards acquisition. Also, retaining management would be dishes where experienced tribe in initial phase 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 due to some common operations will create value in an average completed merger. The value as mentioned above is created in following fours forms but not limited to only four Combined receipts 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 co mmon facilities, common operations, cheap raw material in case of vertical integration/ refinement 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 blood line of value creation would change. Like whether it is Vertical integration (Supplier benefit), Horizontal integration (increase market share and higher control over prices in retain cases), foregather acquiring (for diversification) etc.