The Economic Rationales behind the Acquisition (Essay Sample)
As a shareholder of the target and the bidder, do you support the acquisition?
Your discussion should cover but is not limited to the following points:
1. The economic rationales behind the acquisition. [related to in-class simulations]
2. Background information about the acquisition and your evaluation of the choices made. These
include the method of the acquisition used (e.g. scheme of arrangement, on-market bid, off-
market bid), the offer price, the offer type (cash or shares), premium, etc. [related to in-clas
3. What are the personal incentives of the board of directors if the acquisition is successful?
[related to in-class simulations]
4. As a shareholder of the target and the bidder, do you support the acquisition? (e.g. look at
share price reaction, financial ratios in the short/long term, etc.).
5. Review relevant financial press discussions and annual reports in the years following the
takeover. Analyze any significant subsequent business (e.g. sale/divestment) or
accounting (e.g. write-down/impairment) decision and evaluate the underlying reasons
and rational for the choices made.
While the assignment is largely practical, assignments gaining higher marks will need to refer to
academic literature to support arguments, in addition to Internet and practitioner-based literature.
These can be located through search engines (e.g. Google Scholar) and the UTS library website. You
are only to use publicly available information in order to complete this assignment. For example, the
Internet, annual reports, newspaper and journal articles, databases, and books.
Significant businesses and or accounting done after the takeover and reasons for the decision made
At the point of acquisition, goodwill measured by the difference of acquisition amount to the fair value is established (Richard et.al 2000). In some cases, the investment acquired may be having a high rate of capital allowance and thus over the years may be revalued and the fair value compared to the sale value realised a loss which could be seen as the impairment. Firms dispose assets for a wide range of reasons including, lack of use, high capital allowance, closure of the product line, and government policies (Robert and Anthony 2015). The aspects for what happens will be assessed in the current analysis.
From the report, James field investment portfolio was has a good will on acquisition of investment property. For instance commercial property acquired in 2002 for $42m was worth a fair price of $39.5m and thus underwent a revaluation resulting to impairment. This is in line with IAS 36 that outlines when and why a property may be impaired (Cathy and Susan 2014). The firm was involves in sale out of investment they had earlier made worth. They were able to make a sale profit of $4.7m. The properties were considered non-core, old styled, and thus out of date. Consequently were not able to attract clients. The firm was also engaged in sale of property to be able to cater for the rising employees benefit expense, as well as be able to amortise the rising goodwill on acquisition. In addition, engagement in property services led to high level of capital allowances with high level of depreciation. The firms on rational bases was forced to dispose of assets that had high impairment losses to be able to sustain business and remain a going concern. Also the disposal was attributed by the high level of leverage in the company. The firm as well accounted for intangible assets, from the financial statements the level of intangible assets had declined from 22,971 in year 2003 to 22540 in year 2004. This is an indication of impairment in the property held, and acquired by the firm. Also the level of sale of investment properties belong to the firm and not meant for resale has increased over the period under consideration. This has been from 9167 in year 2003 to 35550 in the year 2004. The disposal was attributed to the dynamism in business operating environment, changes in tastes and preferences, and a high rate in technological development (Randall 2002). In 2004 the firm sold out 50% of Old Wall grove Road Trust to make a joint venture which would ease their management and expense burden.
On the other hand Mavac group there has been a lot of concentration on property development. Formation of strategic alliances including own developments, joint ventures, and subsidiaries has been their major core of businesses. From their statements, their intangible assets raised from 7688 in 2003 to 19889 in year 2004. This is an indication of high level of property and firms acquisitions as presented by the raising goodwill value. Their level of investment disposal has as well raised over the two periods from 468 in 2003 to 3573 in year 2004. This is an indication that the firm has dropped some of its investments, mainly because they are less competitive and thus are not earning the firm profits relative to the high cost of maintaining the ventures (Adrian and Irene 2001). They have also sold some of their subsidiaries with the sales being made in year 2004. The sale of the s
- Macroeconomics:Economic Growth of UK,US & Australia Description: Economic growth has been reviewed widely in literature. It has been referred to addition, or increase in goods and services. Adding a time measure, economic (EG) of a country is seen as the increase in goods and services per head within a given period of time (Les and David 1995). The increased capacity...7 pages/≈1925 words| 8 Sources | Harvard | Accounting, Finance, SPSS | Essay |
- Advantages and Disadvantages of Long Term FinancingDescription: Every business, whether small, medium, or large, requires finances to cater to its current and future financial needs. As a result, organizational managers should collaborate in strategic financial planning to ensure the business meets its current and future financial requirements. The needs of a business ...1 page/≈275 words| 10 Sources | Harvard | Accounting, Finance, SPSS | Essay |
- Case Study: Sustainability's Corporate EvolutionDescription: Through COSO ERM, organizations are able to holistically view risks in an integrative manner. The issue is for one to understand that the whole risk is not equivalent to the sum of the parts of the risk. Organizations need to understand the risks ...20 pages/≈5500 words| 15 Sources | Harvard | Accounting, Finance, SPSS | Essay |