Mergers and Acquisitions

Merging of two companies provides certain benefits of scale, because the support organization can be reduced. In addition, the two companies together also have combined intellectual properties, patents, production power and distributive network.

if you are involved in a merger

When firms diversify into new business areas, it is called Diagonal Merger

When a company joins with another company or companies to form a single firm.

opening entries in the case of amalgamation in the nature of merger (pooling of interest method)

1) for purchase consideration payable:

Business purchase a/c dr

To liquidators of transferor(seller) company

2)for incorporation of assets,liabilities and reserves:

various assets(taken over) a/c dr

general reserve or (capital loss)a/c dr

(bal fig)

To creditors

To bills payable

To reserves(other than general reserve or p/l A/c when general reserve is not there)

To p/l a/c

To business purchase a/c

To general reserve a/c (capital gain)

(bal fig)

BUT WHERE AS IN THE NATURE OF PURCHASE METHOD:

purchase consideration remains the same ,but

for incorporation of assets and liabilities:

plant and machinery a/c (revised value) dr

land and building a/c (revised value) dr

other fixed assets a/c (revised value) dr

debtors a/c (revised value) dr

stock a/c (revised value) dr

bank a/c dr

goodwill a/c (bal fig)

To creditors

To bills payable

To other liabilities

To capital reserve a/c (bal fig)

all other format remains the same... for more information refer bbm 3rd sem corporate accounting..:)

Ford and Chrysler did not merge; they remain separate entities in the automotive industry. There have been discussions and rumors about potential mergers or alliances over the years, but no formal merger has occurred. Each company has faced its own challenges and successes independently. As such, there is no assessment of a merger's success since it has not taken place.

The impact of a given investment on the overall risk-return composition of the firm. A firm must consider not only the individual investment characteristics of a project but also how the project relates to the entire portfolio of undertakings. The answer to your question is "reducing risk".

More Money, more jobs and an increasing economy

1. The biggest M & A deal was done by Reliance Communication which merged its telecoms tower business with GTL infrastructure Ltd for USD 11 billion.
2. Bharti Airtel acquired Kuwait based Zain Telecom's African business for USD 10.7 billion. Reliance Industries acquired Infotel broadband for USD 1 Billion.
3. The biggest deal in Pharmaceutical sector was the acquisition of the generic drug unit of Piramal Health care by USA based drug maker Abbot Laboratories (ABT) for USD 3720 million.
4. In the Banking, Financial Services and Insurance sector, biggest deal was cut by Hinduja group, when it acquired Luxembourg based KBL European private bankers SA for USD 1.69 billion.

ultimate capability delivered to the user is divided into two or more increments, with increasing levels of capability.

Goodwill is a class of intangible asset which arises when you acquire a business. Goodwill is the surplus of price paid for the target's shares over the net assets of the target (net assets = book value of equity = total assets less total liabilities = shareholders' equity = shareholders' funds).

Writing down goodwill under IFRS

Under IFRS (international financial reporting standards) the value of goodwill is checked each year under an "impairment test" and goodwill is written down if a valuation shows that the acquired target is not worth as much as previously thought. An example is the UK bank RBS's 2007 acquisition of Dutch bank ABN Amro. In 2009 RBS revealed the biggest loss in UK corporate history after it impairment tested ABN Amro and wrote down the value of its investment.

Writing down goodwill under other accounting regimes

Under other accounting regimes e.g. UK and Dutch generally accepted accounting practice, goodwill is amortised or written down a little bit each year, just like depreciation on fixed assets.

Lessons for financial modelling in Excel - the simple solution

If you are trying to model an acquisition by a business that accounts under IFRS, the simplest way to model goodwill is to assume no future forecast change. It's not going to make much sense to forecast an anticipated write down or other revaluation and, in any case, it's a not a cash item so doesn't affect the business's economics.

The more complicated picture

The picture above is slightly simplified. When one business acquires another, goodwill is generated as described above. At the same time, the acquirer gets an opportunity to revalue the existing assets of the target upwards. The acquirer gets the opportunity to review the target's existing assets and also identify separate intangibles sitting within the target (e.g. a brand or publishing title that can be valued as a separate intangible asset). In effect, this means that the price the acquirer pays for the target can be broken down into:
(i) the fair market value of the target's existing assets and liabilities;
(ii) the value attached to separately identifiable intangibles; and
(iii) goodwill (equals the surplus of price paid for the target's shares over the value of the other two types of assets).

Points (i) through (iii) above provide you with a sense of how balance sheet values could change following an acquisition. In the P&L, following acquisition:
(i) revalued tangible assets will be depreciated, increasing depreciation expense;
(ii) intangibles will be amortised, increasing amortisation expense;
(iii) under IFRS goodwill will be impairment tested each year as per the previous RBS example.

In effect the acquisition process gives the acquirer the chance to:
(i) 'find' some extra tangible assets that can be depreciated;
(ii) 'find' some extra intangibles that can be amortised; and
(iii) reduce the amount of goodwill showing on the balance sheet.

Lessons for financial modelling in Excel: the more complicated solution

When modelling a merger in Excel you could, if you wished:
(i) estimate expected revaluations of tangible assets and increases in depreciation;
(ii) estimate separately identifiable intangibles and increases in amortisation.

Conclusion

Without having gone through a valuation exercise ahead of the acquisition it is going to be very hard to forecast expected revaluations and they are non cash anyway - so it may make more sense to model intangibles as per "the simple solution" above. That is, just calculate goodwill as the surplus of price paid for the target's shares over the net assets of the target and forecast no change/ write down going forward. There are always so many big variables when you are trying to model an acquisition that it's hard to imagine that there is much to gain by super-accurate forecasting of non-cash items.

Financial Training Associates Ltd: the Company

This answer has been provided by Financial Training Associates Ltd, a company that provides in-house training courses in excel financial modelling training, corporate and projecte finance, valuation and related subjects.

Hardware acquisition refers to the process of obtaining physical devices and components needed for a computer system or network, such as servers, workstations, peripherals, and networking equipment. This process involves identifying requirements, evaluating vendors, negotiating contracts, and purchasing the necessary hardware. It is crucial for ensuring that an organization has the right tools to meet its operational needs and support its technological infrastructure. Effective hardware acquisition can also involve considerations for budgeting, lifecycle management, and integration with existing systems.

Unless you are referring to it for the THIRD time, use "repeat." Iterate already means "repeat" and so re-iterate means repeat again.

Most mergers are between companies or people who are in trouble and looking for someone like themselves. The ones generally agreeable are those in trouble also. Everyone wants to be thought of as doing good, and here we have people looking for someone who looks like they are to join up with, when what they ought to be looking for is someone who can complement them and provide strength in areas where they are week, and that might be a way for both to grow.

I read somewhere that Daimler never even conducted a due diligence? Why? Who the hell knows?!

Conglomerates benefit from diversification, which can reduce risk by spreading investments across various industries and markets, leading to more stable overall performance. They often have access to greater resources and capital, allowing them to invest in new opportunities and weather economic downturns. However, weaknesses include potential inefficiencies due to management complexities and a lack of focus on core business areas, which can dilute brand identity and operational effectiveness. Additionally, conglomerates may struggle with integration and coordination among diverse subsidiaries, leading to challenges in strategic alignment.

Mergers in banks can lead to several challenges, including regulatory hurdles, integration difficulties, and cultural clashes between merging institutions. These issues can result in operational inefficiencies and a loss of customer trust. Additionally, there may be concerns about reduced competition in the banking sector, potentially leading to higher fees and lower service quality for consumers. Effective management of the merger process is crucial to mitigate these risks.

true

discuss various factors affect percepation with proper ,I llustrations

A solvency certificate is a basically a representation as to the solvency of the entity which issues it.

Although the solvency certificate has little use against the entity that issues it (either the entity is solvent or it is not - issuing a certificate which wrongly states the position will not change anything), a party relying upon a solvency certificate can sometimes protect themselves against third parties.

For example, in many jurisdictions, if a company enters into an undervalue transaction whilst it is insolvent, the liquidator can subsequently apply to have the transaction set aside. However, if an individual demonstrated that they acted in good faith and did not know that the company was insolvent, the court may not be prepared to set the transaction aside. Showing that they relied upon a solvency certificate is a good way to demonstrate that they made proper inquiries and believed the company to be solvent.

establish responsibilities, maintain adequate records, insure assets and bond key employees, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, perform regular and independent reviews

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