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Corporate Finance Sample Assignment

   

Added on  2021-04-17

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Running head: CORPORATE FINANCECorporate FinanceUniversity NameStudent NameAuthors’ Note

2CORPORATE FINANCETable of ContentsIntroduction................................................................................................................................4Solution to Question 1:...............................................................................................................4Solution to Question 2:...............................................................................................................5Solution to Question 3:...............................................................................................................5Solution to Question 4:...............................................................................................................8Solution to Question 5:...............................................................................................................9Solution to Question 6:...............................................................................................................9Solution to Question 7:.............................................................................................................11Solution to Question 8:.............................................................................................................12Conclusion................................................................................................................................13References................................................................................................................................14

3CORPORATE FINANCEIntroductionThe current study critically evaluates important strategic financial issues that need to beconsidered in a specific acquisition or merger and analyses exposure of a company to diversefinancial risks together with techniques required to handle the same. The present studyhighlights the given case on Earling Construction Plc that acquired Manco Construction Plcthat crumpled due to the crash in the economy. Moving further, the study explains theprocedures that can be undertaken by Manco Plc to defend takeover, identification ofpredator and target as per the given case. Furthermore, this studies critically analyses the wayManco might perhaps view a probable management buy-out (MBO) compared to takeoverand evaluates the benefits and limitations of MBO. Moving further, the study elucidates indetail about different methods of acquisition with real life examples, reasons for undertakingacquisition and ways of making payments for the target corporation in a specific take-over. Solution to Question 1:Steps that Manco Plc need to take in order to defend takeover bid by Earling PlcThe steps that Manco Plc have the need to undertake in order to defend takeover bid byEarling Plc include implementation of shareholders rights scheme, execution of voting rightsplan, green mail, white knight and enhancing debt. Shareholder’s rights plans can help in defending takeover by activating a prospectiveacquirer that declared its intentions at that moment. Under this kind of plans, shareholders ofManco Plc can buy supplementary firm stock at a luring discounted price, thereby making thesame more difficult for specifically the corporate raider to acquire control (Devi, 2016). Management of Manco Plc can consider voting rights plans. In this case the targetedcorporation Manco Plc might also execute a voting rights scheme that can separate specificshareholders from their voting powers at a pre-ascertained point. The corporation might think about pursuing the greenmail option by purchasing back itscurrently acquired stock from a supposed raider at a superior price in a bid to avert a takeover(Brueller et al., 2016).

4CORPORATE FINANCESolution to Question 2:Identification of the “predator” and “target” as per the above mentioned casePredator is necessarily regarded as the financially strong corporation in the merger or elseacquisition. The weaker targets of acquisition are now and then called “prey” as they can beseized by powerful corporations. Several corporations fall somewhere in the centre of theseextremes. Essentially, the target corporationis the one that is the subject matter ofamergeror elseacquisitioneffort. Particularly, a takeover effort can be of different types,depending on the outlook of target firmtoward specifically the acquirer firm (Boschma &Hartog, 2014).As per the given case study, the predator is the Earling Construction and the target is theManco Plc. The company Earling Construction suffered immensely owing to the break downin the economy that was necessarily an outcome of the crumple of the entire constructionindustry. However, it averted the dire consequences since it prepared itself for the possibilityalthough its rivals suffered hugely due to the crash in the economy and were on the verge ofcollapse (Kansal & Chandani, 2014). Again, Earling Construction observed that Manco had adistinct value gap and identified Manco as a probable acquisition opportunity. During theyear 2007, share price of Earling was €10.50 per share, while share price Manco was €4.75per share. Therefore, in the end it can be hereby justified that Earling Construction is thepredator and Manco Plc is the target. Solution to Question 3:Suggestions regarding the way Manco might possibly view a potential ManagementBuyoutManagement buyout (MBO) engages the management team of a corporation amalgamatingresources to obtain all or else attain the company partially. For the most part of the time, themanagement team of the company acquires entire control as well as ownership, utilizing theirproficiency to develop the corporation and move it forward (Popli & Sinha, 2014). Essentially, for a corporation like a Manco Plc undergoing an alteration in ownership, theroute of management buyout delivers benefits to all concerned. Most evidently, this permitsfor flat transition of company ownership (Davies et al., 2015). As the new owners become

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