Caselet 4 6.

Against the given backdrop, briefly describe how a company can retain its key managers during the time of its merger with another company. Mergers among corporate first produce headlines and then headaches i not tackled speedily and tactfully. There are around 8500 companies listed on all of 23 SEs in India. However, only 500 odd companies account for almost ninety five percent of total market capitalization and are squeezing the smaller companies out of business in most industries facing oversupply. Thus, the run has already started with most multinationals subsidiaries looking out for gobbling the smaller players in their identical line of businesses. Human resource is important during this stage and can really jeopardize the new companys competitive edge. During mergers and acquisitions, the new company would derive the benefits of scale: it would unite plants and staff with more products to sell through its marketing channel. Thus, most companies will have two managers for every available position depending upon the number of layers between the worker and management. However, to get the new company going, the first hurdle is to select the top layer of management. During this stage, market rumours go ripe and strong and could sometimes become facts if they are not quickly removed. As the stock price falls and talented people pay attention to exit, a decision needs to be taken on whom to keep and whom to retrench. Caselet 5 7. On what basis do companies grant ESOPs to various employees? 8. Can ESOPs be used by a closely held company as a tool for enhancing employee performance? Many companies across the world consider ESOPs as incentives for employees to perform well in the future. Since the market is the eventual arbiter of performance, the price it puts on the companys stock will help find out the value of employees holdings. But should the offer be an equal number of shares to each employee or should it vary based on their past and potential performances? Thats where selecting the right parameters of performance comes in. As per the standards fixed by US companies, the main option is between absolute and relative indicators-progress in sales, profits, or share prices, either in absolute terms or relative to those of rivals. Added to that, specific targets could be fixed for different employees working in different positions and capacities. To cite an example, ICICI took into account the performance against some pre-fixed targets, the management level, the leadership quality, and the technical knowledge of every individual before picking the 100 -and -odd out of the 1,200 people that the company recruits. Inability to meet these targets at any point will rule a beneficiary out of the ESOP. The central idea is to make it a forward looking tool. By integrating personal goals with the organisation, it should make key people think and work better for the future.

Caselet 6 9. If the trust buys shares from the market, can the company give loan to the trust to buy its own shares? 10. How are the profits from ESOP taxed? 11 .Are ESOP shares eligible for bonus and right issue later on? Nowadays, getting employees stick to companies is becoming a hard task for the employers of Infotech, Pharmaceutical and other knowledge- based industries. Many Infotech companies are using ESOP concepts to keep the employees turnover low. Designing and implementing an ESOP plan is not an easy job. While designing the ESOP plan, companies have to consider various factors and strike a balance between various interested groups like employees and shareholders. In addition, effect of tax on the ESOP plan should also be carefully planned. The following discussion will explain how software giants are implementing ESOPs as employee benefit tools. Around seven years back in 1994, the Indian software giant, Infosys Technologies Limited, was the first company to implement its ESOP plan. The company established Employees Welfare Trust and transferred 7,50,000 warrants to trust for the benefit of eligible employees. The company extended loan to the trust so as to purchase warrants. Afterward, the trust transferred the warrants at Rs.1 each and each warrant permitted holders to acquire a single share of the company at Rs.100. Four years down the line in 1998, the company launched its second ESOP plan. Under this plan, it offered options, which were exercisable for equity shares, represented by AD Rs.8,00,000 shares were reserved under the plan to be issued. The Government fixed a higher ceiling of US$ 50 within which shares are to be issued. Hence, the number of equity shares keeps on changing with the changes in the prices of shares in the stock market. Caselet 7 12.Against the given backdrop, briefly describe the various methods that are being used by professionals for valuing a business. There are many reasons that necessitate us to know the value of a business-a merger/outright sale, tax or loan, or real estate planning. Whatever may be the reason, trying to come out with a suitable figure can be a key challenge. There are various difficult-to-estimate intangibles that are a factor in the value of a business. It is not just a process of summing up the numbers from various reports. Business valuation has been known to be an art, rather than a science. Estimates of a business value by various experts can vary by as much as 30 percent. Not only is there no uniformity in methods used, but there is also no consistency in giving names to the methods. Each method has a wide variety of names. The most pertinent factor in any valuation is that the method used should be

appropriate to our kind of business, satisfying all our valuation needs and producing a valid and supportable figure. Such wide variety of methods causes confusion in picking up right one. That is why we often take the help of professionals. There are plenty of advantages and disadvantages of each method and there always seem to be a new valuation method on the anvil. Caselet 8 13.Describe the meaning of the terms Dawn Raid, Poison Pill and Saturday Night Special used in the paragraph below. For some investors, terms like Poison Pill, Dawn Raid and Saturday Night Special can be scary. Though they might resemble the terms used in the James Bond comics, there is nothing entertaining about them from an investors point of view. Holding stocks in a company means the investors are part owners; with mergers and acquisitions: taking place every month/week, it is pertinent to know what these terms mean for investors holdings. Mergers,acquisitions and takeovers have been part of the corporate game for centuries. In todays fast-changing business environment, mangers often face decisions regarding acquisitions or mergers. The job of a good management is to maximize shareholder value. In most cases, mergers and acquisitions can enable a corporate to develop a competitive edge and finally enhance shareholder value. There are several ways in which two or more companies can combine their efforts. They can be partners in a project, mutually agree to join forces and merge, or one company can totally acquire another company. Caselet 9 In the given context, briefly describe how M&As are being financed in India? Financing of the Indian M&A activities need a new direction. It is high time the RBI realized the absence of bank finance for corporate takeovers badly effects the growth of Indian M&A activity. The numerous financing constraints that continue to plague the Indian M&A scenario should become a matter of great concern for the RBI.