Report on acquisition. This report is prepared to examine different offers proposed by the Alpha Plc to Delta Plc in acquisition of the target company. It is to analyze that which offer is most beneficial for acquiring company and vice versa and to recom

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Report on offers proposed

 by Alpha Plc acquiring

 Delta Plc

M.Ali Merchant

24 February 2012

Contents

  1. Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . .3

  1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

  1. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

  1. Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

  1. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

  1. Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . 13

  1. List of References. . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Executive Summary:

This report is prepared to examine different offers proposed by the Alpha Plc to Delta Plc in acquisition of the target company. It is to analyze that which offer is most beneficial for acquiring company and vice versa and to recommend offers to be negotiated by each company.


The report draws attention to the fact that each offer consist of different combination of offers including cash and stock. Each offer is valued to £360,000,000 but with different cost of acquisition of Delta Plc which is calculated later in this report.

Calculations in this report to analyze offers includes Target shareholders’ gain – (the premium), Acquirer’s gain and The post-merger values of the combined companies.

This report finds that stock offer which is discussed and calculated later in this report is most beneficial in respect of Alpha Plc while cash offer is most beneficial in respect of Delta Plc.

It is recommended in this report that Alpha Plc should issue Delta Plc shareholders 0.80 shares of Alpha Plc per share of  Delta Plc stock and Delta Plc should negotiate to receive £12.00 per share for the shares of Delta Plc from Alpha Plc.


Introduction:

Background:

“Seasoned Advice from the Merger Arena,” published in 1985, right in the heat of the M&A land grab. The author is Sam Segnar, chairman and CEO of an energy company called InterNorth Inc. (that would later that decade morph into an outfit named Enron). He laid out a set of brilliant tactics, and the one he saved for last—“because I can’t overemphasize it”—is this:

“Don’t Impose Your Standards to the Absolute. When you buy a company, you are buying a performance record. This is a company that made it the way they were structured and managed, not the way you are. You want to sustain the culture that has achieved that record. Start imposing new people, new requirements, new values, and suddenly you don’t have what you thought you bought.” (James Kristie, editor of Directors & Board)

Now it has become the modern technique to expand industry by mergers and acquisitions rather than making huge investment which is quite a slower process of expansion.

Aim:

The Acquirer Company – Alpha Plc aim to acquire The Target Company – Delta Plc. The objective of this report is to analyze various offers (cash offer, stock offer and mixed offer) proposed by Alpha Plc to Delta Plc which are being negotiating between both companies.

Alpha Plc (Acquirer company) proposed three offers to Delta Plc (Target Company) which are discussed later in this report.

Description of these offers and calculation and evaluation for each offer are followed by a comparison. At the end of this report, the most beneficial and cost efficient offer incase of Alpha Plc and Delta Plc is recommended.

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Key Definitions:

  1. Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase. (http://en.wikipedia.org/wiki/Economy_of_scale)

  1. Economies of scope are conceptually similar to economies of scale. Whereas 'economies of scale' for a firm primarily refers to reductions in average ...

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