Instructions

The CEO of ABC Telecom Ltd. (ABC) is in a quandary since he received the telephone call in the morning from his counterpart at LMN Telecom Ltd. (LMN). Both companies were engaged in a bitter experience a couple of years ago when they had attempted to merge with the intention of creating a behemoth telecom company, possibly the largest in the world. The merger had fallen through due to opportunistic behavior on the part of Mr. Das, then CEO of LMN. During the time the merger talks were taking place,  Mr. Das had also approached a few other suitors for LMN in an attempt to force ABC to pay a higher price. Further, there were reports of attempts by management of LMN to scuttle the deal. Back then, ABC had also faced stiff opposition to the deal from one of its large shareholders.

Since then, a lot has changed for both companies. The bleak economic conditions due to recession had led to a drastic fall in the market value of both companies, with ABC comparatively losing much more in terms of market value. Raising money has become more difficult for both companies, especially for LMN. On the brighter side for ABC, the opposing shareholder had recently sold off his stake to another investor who earlier had supported the original merger deal with LMN a couple of years ago.

Question 1

Which of the following would be the most appropriate line (s) of thought for the CEO of ABC to adopt in response to the offer by LMN?
I. Once bitten twice shy. There is simply no way I can think of resuming talks with LMN after their unethical behaviour the previous time around. I would rather spend my time on merger discussions with other companies.
Ii. The deal may make less business sense this time around. However, if it goes through, I will become the CEO of the world’s largest telecom company. So let us try our luck once more.
Iii. I will resume talks only if they provide guarantees as to the reimbursement of our expenses incurred, in the event of the deal not materializing.
Iv. Let me not be biased against dealing with LMN, if we can secure the deal at a reasonably low price, benefiting our shareholders, let us go ahead with it.
V. I am not sure if we can raise the money now. In any event, they are the ones facing greater financial problems. So let’s not hurry now. We might have an opportunity to buy them out at a cheaper price later.

Question 2

The merger of ABC and LMN has been confirmed after detailed negotiation with LMN holding the majority share of the resultant entity. LMN has financed the merger by taking debt at higher - than - market interest rates from its bankers, in the hope that it would be able to streamline operations and reduce costs in the resultant entity which will allow it to repay the loan. If you were an investor looking to invest in telecom companies, which of the following could be the strongest reasons for staying away from investing in resultant entity?

Instructions

Read the following caselet and choose the best alternative:

 Island of Growth was witnessing a rapid increase in GDP. Its citizens had become wealthier in recent times, and there had been a considerable improvement in the standards of living. However, this rapid growth had increased corruption and nepotism in the Island. In the recent times, a fear had gripped the population that corruption would destroy the inclusive nature of the society and hinder economic progress. However, most citizens had kept quiet because:
a. they had benefited from the corruption indirectly, if not directly.
b. they did not have the time and energy to protest.
c. they did not have courage to rise against the established power centers.

There was a need to remove corruption but no one was willing to stick his neck out. Many politicians, bureaucrats and private organizations were corrupt. Media and intellectuals kept quiet, as they benefited indirectly from corruption. The common man was scared of state's retribution and the youngsters feared insecure future.

Against this background, an old, unmarried and illiterate gentleman of high moral and ethical authority, Shambhu, decided to take on the issue of corruption. He sat on a hunger strike in the heart of the capital city of the Island. Shambhu demanded that the Government should constitute new laws to punish the corrupt across all walks of life. Media and the citizens of the island gave massive support to Shambhu. Buckling under the pressure, the Government promised to accept Shambhu's demands. He ended the hunger strike immediately following the Government's announcement. Shambhu became the darling of the media. He used this opportunity as a platform to spread the message that only citizens with an unblemished character should be allowed to hold a public office.

A few months later, it was found that the Government had not fulfilled any of its promises made to Shambhu. Infuriated, he was thinking of launching another island-wide protest. However, this time, he sensed that not many people and media persons were willing to support him.

Question 3

Read the following statements:

1. People's latent anger against corruption
2. Shambhu's moral courage
3. Hungry media looking to raise issues
4. Raising income level

In your opinion, which combination of the above statements is the most unlikely reason for Shambhu's initial success?

Question 4

Which of the following could be the most likely reason for decline in public support for Shambhu?

cracku

Boost your Prep!

Download App