A Ltd. is considering the acquisition of B Ltd. and management estimates that the acquisition will create a synergy worth ₹ 220 lakhs. The following information is provided : Particulars A Ltd. B Ltd. Value of the compan

CS Professional · Corporate Restructuring, Valuation and Insolvency · PYQS · December 2025
A Ltd. is considering the acquisition of B Ltd. and management estimates that the acquisition will create a synergy worth ₹ 220 lakhs. The following information is provided : Particulars A Ltd. B Ltd. Value of the company (Lakhs) 3840 1050 Number of shares (Lakhs) 160 70 Value per share (₹) 24 15 Management of A Ltd. offers cash of ₹ 17/- per share to B Ltd. Determine consideration paid, acquisition premium (i.e., gain of B Ltd.), acquirer's gain (i.e., gain of A Ltd.)

Answer & Explanation:

1. Consideration paid by A Ltd.: Cash offer per share = ₹ 17/- Number of shares of B Ltd. = 70 lakhs Consideration paid = ₹ 17/- * 70 lakhs = ₹ 1190 lakhs 2. Acquisition Premium (Gain to B Ltd. shareholder): Pre-merger value of B Ltd. = Value per share * Number of shares = ₹ 15 * 70 lakhs = ₹ 1050 lakhs Acquisition premium = Consideration paid - Pre-merger value = ₹ 1190 lakhs - ₹ 1050 lakhs = ₹ 140 lakhs Alternatively, Acquisition Premium (Gain to B Ltd. Shareholders) can be calculated as follows also: Premium per share = Offer price per share - Value per share = ₹ 17 - ₹ 15 = ₹ 2 per share Acquisition Premium = Premium per share * Number of shares = ₹ 2 * 70 lakhs = ₹ 140 lakhs 3. Acquirer's gain (i.e., gain of A Ltd.): Acquirer's gain = Value of synergy - Acquisition premium paid Acquirer's gain = ₹ 220 lakhs - ₹ 140 lakhs = ₹ 80 lakhs

Topics: Valuation

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