Acquisition of a companys shares Essay Example

Acquisition of shares 6

Topic: Acquisition of a company’s shares

Lecturer:

EXERCUTIVE SUMMARY

Acquisition of another company shares have some setback and it is deemed prudent for a company to have an assessment on the corporation to be acquired and its external environmental factors affecting the operation before making an offer for purchase.

Some factors such as an trend analysis and critique evaluation of the company productivity, liquidity and the financial stability as well as considering micro and macro economic factors affecting the operation of the company and making assessment as to whether the company is a going concern should be ascertained before making an intention to acquire shares of company Y.


The result analyzed signifies that the company operation is faring well because of its steady growth of 20% for the last 6 years. Cross-sectional analysis and industrial average could have not been done due inadequacy of data for comparison purposes.

REPORT ON THE POTENTIAL AQUISATION OF Y LTD

The following are the detail analysis of the just concluded report on the depicted trend and prospect operation of the company Y and analysis of its continued survival in the industry ,external factors affecting its performance And whether Y limited should be acquired by X limited or not,

Stable growth

The company made a steady growth of 20% for the last 6 years. This signifies that the company can withstands the competition with other industry in the country and thus it depicts a going concern. In this case, purchasing the shares in this company would be viable because the company do not pose any risk. Also steady growth depicts a positive trend of company shares in the market and thus purchase consideration of 90 million Euros will be earned back from investment inform of profit within a given time consequently imply that Y limited has minimal rate of risk and high returns (Anon., 2010)

Sophisticated expertise

Y limited is a company that deals with information technology services and thus the company would be privileged in having a right of entry to ongoing latest technology development and thus technology is a key factor in determining whether the shares of a company can be acquired by another company and to what extent of shareholding in order to minimize risks of investing in a non viable company. (Fuchs, 2010)

Therefore, X limited should consider acquiring shares of Y limited because the company would earn benefit from investment in this company due to advance technology the company is employing. Where a company is intending to acquires shares of a subsidiary, it should first satisfy itself that the latest technology is advanced in the company. This is because a company that employs advanced technology would mean that it can meet customer satisfaction as well as it can compete in the stock market with other listed company. (Killian J. McCarthy, 2012)

Economies of scale and scope of work

It can be observed that X limited is intending to acquire shares of Y limited which is a company based in Europe in the same industry of providing IT service. This can be a great boost to the company inform of competitive advantage in the foreign country implying that investing in this companies would facilitate financial strength as well as the economies of scale and thus the company would be able to earn more revenue and remains strong in the competitive market accompanied with advanced technology.

Other factors such as political risk and general economic condition should be assessed in line with scope of work of the subsidiary in relation to purchase consideration in order to avoid other external jeopardy that will bring loss to the company’s operation. (Edward P. Halibozek, 2005)

Executive and promotion capability

Investing in this company would provide further knowledge and expertise in management and marketing because X limited will be privileged with diverse knowledge from foreign countries. This can be employed in providing good managerial skills globally leading to good corporate governance of the company.

From the above background information concerning the internal and external business environment of Y limited, it can be depicted that acquisition of its shares would yield a return to the company and facilities expansion of the company. This therefore implies that X limited should buy the shares of the company at the stated purchase consideration of 90, million Euros. (Duarte Brito, 2006)

LETTER OF TRANSMITTAL

Letter of transmittal

For common shares of

Y limited

X limited

Pursuant to buying shares of Y limited for a consideration of 90million Euros in cash, X limited exercised its right to purchase the shares under the terms and consideration signed in the offer for purchase indenture. You are obliged to

  1. To reassign the shares of Y limited bought to X limited on the conditions that X acquired the shares of Y

  2. To order for imbursement of the fair value of your residual shares.

Therefore, the undersigned hereby offers to jolt X limited (an acquisition company) upon the requisites and circumstance set in the tender for purchase. We admit the acceptance of the planned number of shares to be bough in Y limited worth 90 million Euro subject to the conveyance method set on the offer for purchase contract.

Number of shares bought

  • Name(s) of proof title-holder

  • amount of shares offered

  • share credential number (if any)

Whether shares will be conveyed by book- entry transmission

  • DTC applicant number

  • region code and cell phone number

  • contract code number

  • Autograph

I hereby pledge that the official document in lieu of the shares are original and is in appropriate form for conveyance or appropriate substantiation of a book entry reassign of such shares at the depository trust company pursuant to terms and condition set out in the tender for purchase indenture and requirement of a transmittal letter.

Name of the company: X limited

Address; 4606

Area code; 301002

Zip code: 34567

Endorsed signature…..

Date 31st December 2012

Reference

Anon., 2010. In Mergers, Acquisitions, and Corporate Restructurings. p.ppg 595.

Duarte Brito, ‎.C.-L., 2006. In Mergers and Acquisitions: The Industrial Organization. p.ppg 8.

Edward P. Halibozek, ‎.L.K., 2005. In Mergers and Acquisitions Security: Corporate Restructuring. p.ppg 65.

Frankel, M.E.S., 2011. In Mergers and Acquisitions Basics: The Key Steps of.

Fuchs, E., 2010. In Success Factors of International Mergers & Acquisitions. p.ppg 8.

Killian J. McCarthy, ‎.D., 2012. In Understanding Mergers and Acquisitions in the 21st Century.

Frensch, F. (2007). In The Social Side of Mergers and Acquisitions: Cooperation (p. ppg 63).