Question $4$

$4\mathrm{.}1$ Critically analyse the reasons for which some firms want to acquire other firms. That is$,$ what are the driving forces behind M&A activities?

$(16\frac{1}{3}\%)$

$4\mathrm{.}2$ List a number of defence mechanisms against takeovers.

$(7\%)$

Based on the following scenario answer the question that follows:

Martin Manufacturing has earnings per share $($EPS$)$ of $$3\mathrm{.}00,5$ million shares outstanding, and a share price of $$32.$ Martin is considering buying Luther Industries, which has earnings per share of $$2\mathrm{.}50,2$ million shares outstanding, and a share price of $$20.$ Martin will pay for Luther by issuing new shares. There are no expected synergies from the transaction.

$4\mathrm{.}3$ Assume that Martin pays no premium to acquire Luther. Calculate Martin's priceearnings $(\frac{P}{E})$ ratio both pre and post$-$merger.

$(10\%)$

$($TOTAL $33\mathrm{.}3\%)$