Question 4

(a) Discuss two key challenges in implementing a successful merger.

(b) In mergers and acquisitions, do the shareholders of the target firm typically gain or lose? Why?

('c) BIG company is considering acquiring SMALL Company. BIG produces big cars, while SMALL produces small cars. BIG's share is trading at RM20 and SMALL's is trading at RM8. SMALL has 1 million shares and BIG hopes to generate synergies of RM1million.

(i) What is SMALL's market capitalization value? (ii) What synergies may BIG hope to generate from this acquisition?

(iii) What is the highest exchange ratio which BIG should offer?

(d) Discuss the key differences between a spin-off and a carve-out.