Explore BrainMass

Explore BrainMass

    Mergers and Acquisitions

    From a legal standpoint, there are three basic procedures that a firm can use to acquire another firm. Often these three variations are not distinguished, so we typically use the term merger/acquisition regardless of the actual form of the acquisition:

    1. Merger/Consolidation: In a merger, the acquiring firm gets all the assets and liabilities of the acquired firm, the acquired firm ceases to exist, and the acquiring firm keeps its name and identity. In a consolidation, the two pre-existing firms cease to exist and become part of a new business entity.

    2. Acquisition of Stock: A tender offer is a public offer made directly to the shareholders of the target corporation to buy their shares for either cash or securities. These offers are often contingent on the acquiring company’s ability to purchase a desired total number of voting shares.

    3. Acquisition of Assets: An acquisition of assets involves the acquiring firm purchasing all of the assets of the firm. This form of acquisition involves transferring title of the assets to the purchasing firm, which can be a costly legal process. A formal vote of the shareholders of the selling firm must also be held.

    Mergers and acquisitions often occur because of the synergy that can be created when two firms become one. We often hear the expression ‘the sum is greater then its parts’. Synergy is created when the value of the new firm, after an acquisition, is greater than the sum of value of the two firms individually.

    The increase in the value of the firm often comes from increased cash flow such as:

    (1) marketing gains: co-branding, better distribution, monopoly power
    (2) cost savings: economies of scale, replacing inefficient managers
    (3) tax gains: shared operating losses, unused debt capacity
    (4) reduced costs of capital

    Using the discounted cash flow model we can represent the synergy as the change in future cash flows between the old firms and the new firm discounted to present value.

    We can also use this synergy to calculate what the net present value of the merger is to the acquiring firm.

    Often the acquiring firm offers its own securities instead of cash to the shareholders of the target firm. In this way, existing shareholders of the target firm become owners of the new firm. An exchange ratio between old shares and new shares can therefore be determined.

    Photo by John Lockwood on Unsplash

    © BrainMass Inc. brainmass.com October 6, 2022, 10:36 am ad1c9bdddf

    BrainMass Solutions Available for Instant Download

    Goodwill on consolidation computation

    Sunreel Co purchased 80% stake in Codfish Inc on 1st January, 20x0. The purchase amount involved cash of $500,000 with an additional amount, of $40,000 to be paid a year later. As at that date CodFish's share capital is $400,000 with retained earnings of $10,000. Excess cash can be invested at 8% as at 1st January 20x0. C

    Case: Waltham Inc. acquisition of Artforever.com

    Waltham, Inc., a publicly traded firm, is considering the acquisition of a private company, Artforever.com, which specializes in restoring damaged artwork and vintage photographs for high net worth individuals. Waltham's CEO and chairman of the board, Willie Ray, described the motivation for the acquisition as follows: "We are r

    BMW-Rover Merger

    Please help me improve the essay by commenting and suggestion on what to add (Please, IN DETAILS) Case is attached. Finance and Operations: How did the substantial investment have implications on the operations during the merger? Introduction: The main reason that led to the acquisition of Rover by BMW are discussed. Al

    Rover Merger Case Study

    2,000 words + 150 Reflective statement • Introduction • Discussion • Conclusion • Reflective statement (150 words exclude in word counting) • References 16-20 sources Using the BMW acquisition of Rover as the topic and critically evaluate the interconnection and interplay between the two. "Finance and Oper

    Finance for non-finance managers (health-care)

    Discussion question : Considering your leadership role and responsibility in developing financial acumen among non-financial managers within your organization(hospital or health sector), discuss what specific approach you've used or would use to promote improved understanding and accountability to improve financial performance.

    Mergers & Acquistions - Goodwill

    Goodwill is an accounting entry equal to the difference between purchase price and the net asset value of the acquired assets. As a business manager, what do you believe goodwill represents? How could the factors that goodwill represents actually contribute to improving the combined firm's future cash flows?

    Mergers & Acquisitions: Exit Strategy

    This is an end of chapter case question, The chapter is Analysis and Valuation of Private held companies, the question asks about the issues, challenges and alternatives in seeking an exit strategy.

    "Proposed" Merger Between United Airlines and Continental

    Please assist with the question, not a page long answer, a couple of short paragraphs: On May 3, 2010, United Airlines and Continental Airlines announced a definitive merger agreement that would create the world's largest airline. According to the Wall Street Journal, the combined company would be nearly 8% larger than Delta Ai

    Analysis of Merck's Acquisition of Medco

    See the attached files. Please provide some assistance with the following paper for Merck's Acquisition of Medco. A 8-10 page paper (double-spaced) has to be a written analysis, including tables of financial calculations. It has to include the Key Players which are explained in the attachments. The attachments also include fi

    Computing the Value of Operations

    Bella Corp. is interested in acquiring Johnson Inc. Johnson has 1 million shares outstanding and a target capital structure consisting of 25% debt. Johnson's interest rate is 9.5%. Assume the risk free rate of interest is 5% and the market risk premium is 6%. Both companies have a 40% tax rate. Johnson's free cash flow is $4.

    Impact of Supplementary Federal Acquisition Regulations

    Hello. I have a question that I have been thinking about regarding the Federal Acquisition Regulation (FAR). Specifically, how it applies to federal organizations that are not required to follow it in its entirety, and are not bound by it, such as FDIC and others. Yet, I'm sure they still follow the Federal Acquisition Regulatio

    Maximizing Earnings Per Share in an Acquisition

    Suppose XYZ Corporation's stock is trading at $50.00 per share while ABC Corporation's stock is trading at $25.00 per share. XYZ has earnings per share (EPS) of $1.00 while ABC has EPS of $2.50. Currently neither company has debt, and each has 1,000,000 shares of stock outstanding. If the merger takes place based on an exchan

    Mergers and Acquisitions: Successful Processes

    Discuss your personal experience with mergers. Has this company been acquired or has it acquired another company? What were the highlights and lowlights of the merger process? Was the merger successful (be sure to define how you measure success)? Please use APA format for any quotations or citations. It should be a minimum of

    Computing the Maximum Share Exchange Rate for a Merger Candidate

    (Stock for Stock Merger) A Corporation is considering the acquisition of X Corporation. Each corporation has the following data: Existing Income Number of Shares A Corporation $4,200,000 621,000 X Corporation $2,200,000 365,000 Synergistic additional benefits from the combination are $1,200,000. What is the

    Federal Acquisition Regulation (FAR) and Policies

    1. Using the Federal Acquisition Regulation (FAR) identify the policies/procedures regarding requirement definition/description and provide a summary of the policies/procedures. 2. Using the FAR identify the policies/procedures regarding acquisition planning and provide a summary of the policies/procedures. 3. Using the FA

    Actual Cost of Acquisition Using Company Stock

    Firm X is being acquired by Firm Y for $35,000 worth of Firm Y stock. The incremental value of the acquisition is $2,500. Firm X has 2,000 shares of stock outstanding at a price of $16 a share. Firm Y has 1,200 shares of stock outstanding at a price of $40 a share. What is the actual cost of the acquisition using company stock?

    Corporate Finance Jobs in the Future

    For the 2 topics below... - portfolio diversification, - mergers and acquisitions. ... identify and briefly discuss two important concepts applicable to your professional discipline. What corporate finance jobs are likely to pay the most compensation over the next five years? You must also respond to this hypothetical

    International Mergers - Dow Jones and News Corp

    Read "International Mergers" Respond to the following: • If you had been a shareholder of Dow Jones, what tradeoffs would you have considered when deciding whether to take the $60 per share or the shares in Ruby Newco? • Discuss the differences in merger practices between U.S. companies and companies in other count

    Hostile Takeovers, Strategies, and Defenses

    Mergers and Acquisitions 1) What is your opinion to the question below? There are three main types of acquisitions: an acquisition of assets, an acquisition of stock, and a consolidation or merger. With an acquisition of assets, a company acquires another company by purchasing all of the company's assets. With an acquisiti

    Impact of Tax Loss Carryforward on Value

    Hahn Textiles has a tax loss carryforward of $8000,000. Two firms are interested in acquiring Hahn for the tax loss advantage. Reilly Investment Group has expected earnings before taxes of $200,000 per year for each of the next 7 years and a cost of capital of 15%. Webster Industries has expected earnings before taxes for the ne

    Company Merger: Net Present Value, Mergers, and Acquisitions

    If you were to pick one company for Amazon to merge with, what would it be? Pay attention to current net values. Explain your choice with respect to possible benefits of this merger in detail and why you would choose this company over any other choice for a potential merger. How would you finance this merger of with the chose

    Google and Groupon

    NET PRESENT VALUES, ACQUISITIONS AND MERGERS One of financial goals of the financial managers is to maximize the shareholders’ wealth. Therefore, merger and acquisition decisions should be consistent with shareholder wealth maximization criteria and financial characteristics of the targets should be considered in the decision

    Creating a Statement of Cashflows

    1. In Module 3, you will take your income statements and start to construct a cash flow 2 .Using the income statement from Assignment 1, forecast a ten year cash flow using the following assumptions: from 2010-2019 Capital Expenditures of $50,000 per year. Leasehold Improvements of $10,000 per year. DSO of

    Valuation Approach: Clinical Practice

    Please find attached some details relating to a physician acquisition. Please help with the following issues: 1. I need to evaluate what Dr. Roses' practice is worth from the perspective of Hospital CEO. 2. Also, I need help determining a bidding strategy (opening bid, walk-away value) 3. Then I need help determining wh

    Google and Groupon Acquisition

    Net Present Value (NPV) method is one of the most important methods which is used to make capital budgeting decisions by almost every company. NPV method is important because it helps financial managers to maximize shareholders' wealth by making better capital budgeting decisions. Google is Considering Acquiring Groupon:

    Hedging Problem

    The Zinn Company plans to issue $10,000,000 of 20-year bonds in June to help finance a new research and development laboratory. The bonds will pay interest semiannually. It is now November, and the current cost of debt to the high-risk biotech company is 11%. However, the firm's financial manager is concerned that interest rates

    Mergers and Acquisitions - Shareholder's Wealth

    Discuss how a researcher might identify whether the GlaxoSmithklein and Astrazenca acquisitions eventually prove to be successful in increasing their shareholders' wealth. Discussion of corporate strategy to maximize shareholder wealth: - Merger and acquisition activity is analyzed as part of company strategy to deliver shar

    corporate merger and acquisition

    i am looking for help comprising a literature review on success or failure in mergers and acquisitions, and then an application of this to pharmaceutical companies (GlaxoSmithKlein's acquisition of Human Genome Science and Astrazeneca's acquisition of Ardea)

    Financial models for valuation of a company

    I need help. I don't know how to start this or how to build the excel spreadsheet. This assignment requires to build a financial model for valuation of a company. Start with using historical income statements and build a ten year forecast using the information. This probably sounds easier than it is. I would suggest that you sta