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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Two years after acquiring Ganga Retail Ltd, Titan Foods Ltd reviews the deal. Planned synergies were Rs 12 crore a year; actual realised were Rs 8 crore, while one-time integration costs were Rs 6 crore against a Rs 4 crore budget. Which conclusion best reflects a sound post-deal review?

Synergies reached only two-thirds of plan (8 of 12 crore) and integration costs overran by 50% (6 against 4 crore). A sound review therefore analyses the causes and sets corrective actions. Claiming a 150% overrun or that no review is needed misreads the figures.

  1. ASynergies achieved only two-thirds of plan and costs overran by 50%, so root causes should be analysed and corrective actions setCorrect
  2. BSynergies exceeded plan because costs are one-time
  3. CCosts overran by 150%, so the deal must be unwound
  4. DNo review is needed since the merger is legally complete

Explanation

Synergy realisation is 8/12 = 66.7%, i.e. two-thirds. Cost overrun is (6-4)/4 = 50%. A sound review finds causes and corrective actions. A 150% overrun misreads 6/4 as the overrun; unwinding is not indicated by this data.

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