The value of the gains that Ciba saw in the takeover of Allied Colloids was based on financial reporting, improving product performance as well as increasing value for their shareholders

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Ciba Specialty Chemical’s

Case Analysis

Adam Ching

10/25/12

Fin 139

1.) What caused Allied Colloids to become a takeover target?

On March 12th 1998 Ciba Specialty Chemicals (SC) announced its acquisition of Allied Colloids, a company known as a global leader in water treatment. Allied Colloids acquisition aligned with Ciba’s goals in the form of establishing a new pillar for profitable and sustainable growth in the area of water treatment additives. Being the ambitious company that Ciba was, they realized that Allied Colloids could be the platform they had been looking for. This would allow them to enter the water treatment market due to Allied Colloids established global market position and strong technological developments. Allied Colloids was more than just a water treatment company. The company consisted of five divisions, water treatment, additives, colors, customer care, and performance polymers. With its diversification of processes, and an entry into a high potential market, it was easy to see why Allied Colloids was the target within Ciba’s sights.

2.) How did Ciba value the gains from the merger or acquisition?

        The value of the gains that Ciba saw in the takeover of Allied Colloids was based on financial reporting, improving product performance as well as increasing value for their shareholders. At its core, Ciba desired to produce and sell high quality chemicals and enhance the longevity and performance of their products. Being the worldwide company that Ciba was, it was their goal to produce positive results within the global market. As a leader in biological chemicals, Ciba SC was dedicated in meeting the needs of the healthcare, agriculture, and industry. Ciba felt the acquisition between Allied Colloid would enhance the quality and value of their business as well as product performance. Ultimately Ciba’s goal is to create value for its shareholders and the acquisition of Allied Colloids is just one step in the process. Other steps include evaluation of strategic projects, financial reporting, portfolio adjustment, and incentive and share investment plans. To ensure that shareholder wealth is of the utmost importance, Ciba introduced incentive share plans and pay structures that tightly link the interests of shareholders with its employees and managers.

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3).What effect did the acquisition have on Ciba's balance sheet and performance?

Ciba acquired Allied Colloids in 1997, the financial statement for this year showed the company as having sales of 7.82 billion and a net income of 571 million. The following year after the acquisition, sales rose by 85 million. With this rise in sales of around 11%, net income for the company dropped to 369 million. This drop was partially caused by difficult market conditions, however during this year Ciba initiated a restructuring program that would save the company 150 million in 1999.

        The table below shows ...

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