1. Hav Co Mark Fielding-Pritchard mefielding.com1

2. Part A mefielding.com2 Types of synergyCommentRelevance Operational departmental synergies, 1 HR, 1 Audit (internal & external)Yes, these ‘simple savings should be achievable) Operational synergiesSharing of distribution networks, client lists, access to restricted contracts, automation Difficult to see overlaps External financingLarger so cheaper finance may be availablePossibly though the fall in P/E predicted indicates external concern over the merger Internal financeBroader range of projects to easier to invest funds. Larger pool of funds so industries with high barriers to entry become more accessible This could bring benefits but the group will still be small by industry standards ManagementCulture change or management knowledgeThe possible commercialisation of the culture of target will have 1 of 2 effects. Either sales will increase or the scientists will leave

3. Part B Earnings  Average earnings = 1/3[397+370+352]=373  Average capital = 1/3 [483+466+459]=469  [373-(469*20%)]80%= 223  223/7%= $3.2bm Synergy  Current value  Hav (9.24x 2400) =22176  Strand [(16.4x1.1)x(397x80%)]= 5717  Total 28000  After  [(1980+397)80%]+140= 2040  2040x 14.5= 29600  Growth $1.6bn mefielding.com3 So the purchaser wants to pay twice what the seller is asking for!!

4. Part C  Strand Current EPS [397x80%)/1200= 26.5c  Therefore share price at P/e of 18 = $4.75 mefielding.com4 Option 1(5.72-4.75)/4.75= 20.4% Option 2((2.66+9.24)-(4.75x2))/(4.75x2)=25% Option 320 shares gives you $25 plus 1 bond. 1 bond gives 12 Hav shares. Therefore [((25+(9.24x12))- (20x4.75)]/(20x4.75) The answer assumes that the market value of the bond is $100. This ignores the conversion rights. Whether the bond has additional value will depend on whether early conversion can take place (seems no) or whether it can be traded

5. Part C  Investors will generally take cash  Standard take over premiums are 30% so an initial refusal should be expected  Bonds are usually only taken by holders of major blocks  You may want to force managers to take equity if possible so they don’t leave and set up in competition  Business angels should not be allowed equity as they can build up big holdings in Hav mefielding.com5