Instruction: This is an open$-$ended question. The problem requires a comprehensive$$understanding of financial concepts related to mergers and acquisitions that we$$discussed in class, as well as strategic thinking to address the challenges involved. If$$you think appropriate, please feel free to make additional assumptions.$$Company ABC is a multinational corporation operating in the technology sector$$and is considering acquiring Company XYZ$,$ a rapidly growing startup in the same$$industry$.$ The negotiation process is complex, involving various financial and$$strategic considerations. Here are the key financial details for both companies:$$Company ABC:$$ Current Market Capitalization: $$25$ billion$$ Annual Revenue: $$10$ billion$$ EBITDA: $$3\mathrm{.}5$ billion$$ Total Debt: $$8$ billion$$ Cash and Cash Equivalents: $$5$ billion$$Company XYZ:$$ Current Valuation $($pre$-$acquisition$)$: $$3$ billion$$ Annual Revenue: $$500$ million$$ EBITDA: $$150$ million$$ Total Debt: $$100$ million$$ Cash and Cash Equivalents: $$50$ million$$The negotiation includes a mix of cash and stock as the acquisition consideration.$$Company ABC proposes to acquire $100\%$ of the shares of Company XYZ for a total$$consideration of $$4$ billion, consisting of $60\%$ cash and $40\%$ in Company ABC's$$stock$.1.$ Synergy Estimation:$$a$)$ Define and justify two types of synergies that could result from the$$acquisition$.$b$)$ Quantify the potential financial impact of each synergy type, expressed as$$a percentage of Company XYZ$\text{'}$s current valuation.$2.$ Stock Price Impact:$$a$)$ Analyze how the announcement of the acquisition might impact$$Company ABC's stock price.$$b$)$ Consider the Efficient Market Hypothesis and discuss potential market$$reactions$.$Problem $2$

Instruction: This is an open$-$ended question. The problem requires a comprehensive

understanding of financial concepts related to mergers and acquisitions that we

discussed in class, as well as strategic thinking to address the challenges involved. If

you think appropriate, please feel free to make additional assumptions.

Company ABC is a multinational corporation operating in the technology sector

and is considering acquiring Company $xYZ,$ a rapidly growing startup in the same

industry. The negotiation process is complex, involving various financial and

strategic considerations. Here are the key financial details for both companies:

Company ABC :

Current Market Capitalization: $$25$ billion

Annual Revenue: $$10$ billion

EBITDA: $$3\mathrm{.}5$ billion

Total Debt: $$8$ billion

Cash and Cash Equivalents: $$5$ billion

Company XYZ:

Current Valuation $($pre$-$acquisition$)$: $$3$ billion

Annual Revenue: $$500$ million

EBITDA: $$150$ million

Total Debt: $$100$ million

Cash and Cash Equivalents: $$50$ million

The negotiation includes a mix of cash and stock as the acquisition consideration.

Company ABC proposes to acquire $100\%$ of the shares of Company XYZ for a total

consideration of $$4$ billion, consisting of $60\%$ cash and $40\%$ in Company ABC's

stock.

Synergy Estimation:

a$)$ Define and justify two types of synergies that could result from the

acquisition.

b$)$ Quantify the potential financial impact of each synergy type, expressed as

a percentage of Company XYZ$\text{'}$s current valuation.

Stock Price Impact:

a$)$ Analyze how the announcement of the acquisition might impact

Company ABC $\text{'}$s stock price.

b$)$ Consider the Efficient Market Hypothesis and discuss potential market

reactions.$|$