Report on acquisition case study. Methods of evaluation and analysis in this report include focusing benefits of different alternative offers proposed by Acquirer Company to Target Company to acquire in cheapest way.

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A Report on Alpha Plc

acquiring Delta Plc

M.Ali Merchant

23 February 2012

Contents

  1. Executive Summary

  1. Introduction

  1. Methodology

  1. Findings

  1. Conclusion

  1. Recommendations

  1. List of References

  1. Appendices

Executive Summary:

This report provides an evaluation and analysis of the acquisition of Delta Plc (The Target Public Limited Company) by Alpha Plc (The Acquirer Public Limited Company).

Methods of evaluation and analysis in this report include focusing benefits of different alternative offers proposed by Acquirer Company to Target Company to acquire in cheapest way. Other calculations include;

  1. Target shareholders’ gain – (the premium)
  2. Acquirer’s gain
  3. The post-merger values of the combined companies.

All above said calculations can be found at the end of this report in appendices.

Findings of offers analyzed show that total purchase consideration for each offer are same i.e. £360 million. All offers are structured with different combination of cash consideration and stock consideration. It is worthwhile to analyze which offer benefits most.

 
This report finds that offer 2 which is discussed and calculated later in this report is most beneficial in respect of Acquirer’s point of view while offer 1 is most beneficial in respect of Target company.

Recommendations discussed in this report include:

  1. Acquirer should issue Delta Plc shareholders 0.80 shares of Alpha Plc per share of  Delta Plc stock.

  1. Target company should negotiate to receive £12.00 per share for the shares of Delta Plc from Alpha Plc.


The evaluation and analysis conducted in this report has limitations. Some of the limitations include: it is not mentioned that how many shares Alpha Plc is going to acquire from Delta Plc, in this report it is assumed that Alpha Plc se acquiring 100% shares. Financial performance figures in terms of Revenue, Gross Profit, Net Profit are not provided not the nature of company is known whether each company relates to same industry or not, it is assumed that both companies are in the same industry.

Introduction:

With the rising trend of expansion of industry in the world, it is becoming essential for companies in each industry sector to expand either by huge investment (expansion process is slow in this case) or by acquiring another company in the same industry (expansion is much quicker).

It is in the opinion of experts that “It's quite simple--the way to expand your business is through hard work. Keep your customers happy and market aggressively. In the end it comes down to old fashioned sales and marketing, and plenty of hard work. This is what most consultants, professors, and businessmen will insist. You'll hear a lot of slogans and truisms like "there are no shortcuts to success."

We're certainly not about to claim that hard work isn't a key ingredient of success in growing a business. But, in contrast to the traditional wisdom, there is a short cut to growth. Growth through acquisition, too often considered the exclusive domain of the largest of companies, is also quite appropriate for the small and midsize company looking to achieve rapid expansion” (David T. Annis, 2009).

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Alpha Plc is “The Acquirer Company” and Delta Plc is “The Target Company” in this report. The aim of this report is to analyze various options offered by Acquirer company to Target Company which are in negotiation process between Alpha Plc and Delta plc.

Acquirer Company proposed three offers to Target Company which are mentioned later in this report.

A description of the each offer and an analysis and calculation for each offer are followed by a comparison of the three offers. Finally, the most beneficial and cost efficient offer incase of Acquirer company and Delta company is ...

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