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Acme's Greenfield investment: Financial aspects of Acquisition

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Having previously identified the location of its Greenfield investment, Acme, a multi-billion public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S. Your job is to explain to this committee some of the financial aspects of this acquisition.

Deliverable: At the next steering committee meeting, you will provide a detailed presentation of the characteristics of the various external financing alternatives, including the advantages and disadvantages of each. Your report should conclude with a recommendation of which alternative (or combination of alternatives) should be used to finance the overseas investment.

Please include a Abstract and references

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Solution Preview

Having previously identified the location of its Greenfield investment, Acme, a multi-billion public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S. Your job is to explain to this committee some of the financial aspects of this acquisition.

Abstract:

There are three types of external financing options considered for Acme for its $500 million investment abroad. The options are issuing bonds, bank loans, and Initial Public Offering. The advantages and disadvantages of each option are examined. Based on the type of investment that Acme is making it is concluded that an IPO is the most suitable form of external finance for Acme.

There is financing required for the $500 Greenfield investment. As internal funds are not available and if Acme tries to use internal financing its current operations will get disrupted, it is necessary to get outside investment for the project. There are several alternatives that may be used for raising external capital. Each has certain advantages and some disadvantages.

First, Acme has the option of raising finance through issuing bonds or a debt instrument. A bond is a debt security which the authorized issuer owns the holders a debt. There are some advantages of bonds. If Acme issues bonds, the company management retains full control of the company and its ...

Solution Summary

This solution gives you a detailed discussion on Acme's Greenfield investment

$2.19