Business Studies

Business Finance

Easy

Hind Beverages

Hind Beverages Inc., the leading soft drink and drinking water company in the private sector, has acquired Himalayan Water Co., in a deal worth $8.6 billion in 2007 to further expand its market share. A financial decision of this magnitude has significant implicitness for both Hind Beverages Inc and Himalayan Water as well as their employees and shareholders.

Hind Beverages Inc. raised a debt of over $8 billion to finance the transaction. This financing decision affected the capital structure of the acquirer.

What may be the reason behind the acquisition of Himalayan Water Co. by Hind Beverages Inc.?

Control over shareholders of Himalayan Water Co.

Revenge on a rival company

Expansion of business

Maximising profit only

✅ Correct Option: 3

The passage clearly states that the acquisition was made to further expand market share. Acquiring another company in the same industry to grow market presence reflects expansion of business, not revenge, control over shareholders or profit maximisation alone. Hence option 3.

Question 41

What will be the net effect on the acquirer company's capital structure after the acquisition?

Question 43

Identify the source of debt that a company might have used to raise $8 billion to finance the transaction.

Question 44

Why might a company prefer debt over equity for financing?

Question 45

Which of the following statements is NOT correct about capital structure?

What may be the reason behind the acquisition of Himalayan Water Co. by Hind Beverages Inc.?

Solution

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CUET Business Studies Past Year Questions (Topic-Wise)