Topic 19

@rydhu19

There is no issue of financial reporting framework used by companies with regards to any topic in BSc Info Pack.

Please read below guidance of chosing topic 19:

Financial & Operational Consequences of Merger

“An analysis and evaluation of the financial and operational consequences of a merger between two organisations or of the acquisition of one organization by another” .

The Topic and its Significance:

The Topic focus on two key main issues:

1. Merger
2. Acquisition

Merger occurs when two organization agree to go forward as a single entity rather than two distinct organizations. ?Merger occurs for various reasons, such as to stay in the competition, to recognize synergies, to enter a new market and so on.

In this topic, you will be evaluating the consequences of a merger or acquisition. You will basically identify the Financial and Operational benefits or consequences of the merger. ACCA Papers such as F7, F9, P2, P3, and P4 will come in handy, as well as guidance obtained from our professional mentors. Models will depend on the organization you have chosen and how the merger/acquisition occurred. Examples of models could be the SAF model or the Management buyout model.

Should I choose this Topic?

Decision of selection will be based on three things:

1. Topic itself

2. Organization

3. Availability of Information

Topic:

This topic is suitable for students with good grip on the details of acquisition or merger. You need to know why companies merge, how does it benefit to them, how are the stakeholders affected and so on.

Organization:

You won’t find a lot of organization with a merger or acquisition in their history. However, quite a few are available. Some mergers and acquisition were greatly publicized, such as the well known RBS and Faysal Bank merger in Pakistan. However, you need to make sure that you find a merger with commercial sense on which you can obtain enough information for preparing a balanced RAP.

Information Availability:

This should not be a serious issue if you choose a company under public scrutiny. Mergers and acquisition are usually publicized, mostly on newspapers where they are legally required to state if they are planning a merger or when they acquire a target. As have been mentioned frequently, you need to write at least 5,500 words on evaluation and analysis in this topic and that entails that you need a lot of information to make an effective RAP.

The topic can be?summarized?as:

“Choose if you have strong knowledge about the consequences of merger and you can get enough information through both primary and secondary research and also there are no confidentiality issues.”

Rest, if you go with topic please read below articles:

https://www.thestreet.com/story/12997604/1/10-big-mergers-acquisitions-and-spinoffs-to-be-on-the-lookout-for-in-2015.html

https://www.investopedia.com/articles/investing/061515/most-important-mergers-and-acquisitions-2015.asp

Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.

I have managed to retrieve it for you. Please take a look at my posts to Ruva (who came back and told us they had passed) as they include a few important points.

Some of mentors have posted comments too which may be useful to you. (Note: I only offer advice on the Forum, I do not take on mentees).

Yes it is possible to do this using secondary data but as with all topics you must be aware that you must add your own original analysis, not just report what others have found. Students often do not really understand what this means but in a nutshell it entails doing more that just describing what went on. You will need to collect pre-and post data and analyse this. Clear objectives will help. Read up about the after effects of other mergers and consult Google Scholar to find some academic articles (often produced by reputable business schools). Get a good feel for the topic first, plan your objectives and read not just the posts on here but the article on evaluation and analysis on our homepage http://www.opentuition.com/obu

Work out how you will do some original analysis as that is the main reason why students tend to fail this topic. Once you get over that ‘problem’ like ruva, you stand a reasonable chance of pasding

That sounds as if you have done some good work and are now in possession of a good overview of the business motive behind the acquisition. Hitherto I could only give general advice and that is to look at the pre-acquisition position and compare it to the post acquisition position mainly normally just in financial terms and effect on staff (e.g. where a larger company acquires a smaller company in the same line of business it may be because it wants a larger geographic coverage but there may be say with retail, a duplication of stores and some job losses).

However this is a more interesting scenario with the companies you have chosen which will allow you to focus on the many aspects of the synergies and discuss these.

So set out the position of FB for a few years before – as you suggest- its revenue growth (look to see if this was ‘plateau-ing’ or slowing down) You might do the same for Whatsapp and bring in the other stats you mention above. You could also look at FB’s share price and dividends (if Whatsapp was listed you could do the same) and increases in subscribers. (I would have thought you might have been able to get the financials for FB going back to the time it floated)

At this point present some nice clear graphs and charts for most of this (students just seem to overlook how this helps the reader see the position instantly -and the markers love seeing rather than having to read figures) with just the basic explanations to set the scene and paint a clear picture.

Then consider the reasons for the strategic decision by FB to acquire WA and as you say this also involved the synergies. So focus on these synergies. Look at the financial deal for the owners/shareholders of WA -were they bought out of given FB shares?

Post acquisition focus mainly on the acquirer’s financials but you could also see if there has been much impact on WA as a separate entity. See and discuss what has happened with regard to all the pre acquisition trends that you previously identified

I think you could do a sort of SWOT analysis -say of both companies preaquisition or if that is not possible at least the strengths & weaknesses of WA and perhaps the full SWOT for FB and then compare it with the current post-acquisition position. If you have the info you could do a balanced scorecard or otherwise you might do a sort of application of Mendelow’s matrix and consider how the acquisition has impacted on FB s stakeholders.

Your Conclusion should draw all the major threads together and link back to your stated objectives

Provided you have the info I have outlined I think you would have sufficient to fulfil the RAP objectives and your application of the models is your contribution to the original analysis requirements.

@Sam the new rules actually relate to YEARS not submission periods and state:

“For all topics other than 8 and 15, please also note the requirement to base your project on recent organisational activity or processes rather than historical events. (For this purpose ‘historical’ refers to activity that took place more than the three full calendar years preceding the start of the current submission period.)

For example if you were proposing to submit a project in May 2017 for topic 19 the merger or acquisition would have to have taken place AFTER 1 JANUARY 2014”

Obviously in your case your merger is from a much older period. If you had already started your report and done a lot of work I think there is a case for you to write to OBU and show them that you had already been working on your report and now this means that you have been unexpectedly disadvantaged by an unexpected change in the rules. (I understand one of the reasons for insisting on recent work is that there have been attempts by some students to use passed work from years back and ‘recycle’ it. This new rule limits the potential for this)

@sam – I tend to agree with you that the fallout and effects of a merger/acquisition tend to take longer than 3 years before they are reported on/ picked up by outsiders external to the organisation.

You mention ‘culture’ and I imagine you mean organisational culture. However culture can also be an issue if the two organisations are cross-border / international e.g. the Kraft takeover of Cadbury had a serious impact on the not just the workforce but also shocked the UK public generally in how little consideration was given to employees and how promises made were so quickly broken.

I suggest that if you do some research on corporate mergers and acquisitions on Google Scholar you may turn up some articles that may give you some ideas to explore further. With Google Scholar you will find that some of the articles are only available by subscription, however those with a link showing on the right are usually able to be downlo0aded free of charge. By using a few key words (e.g. ‘company merger issues’) you should be able uncover some interesting papers and articles to help you develop your report and therefore help strengthen your analysis.

Hi, i have also chosen topic 19, I want to confirm that the merger and acquisition can be failure too..so opting any company which got their M & A not successful is it ok!
kindly reply me ASAP

Hi,

I am ACCA affiliate having completed all 14 examinations and now I have chosen to do topic 19 for my RAP. I have to say that i have found quite useful information on this forum but i would like some further help if i am to pursue this topic further.

I am aware that a natural way to tackle this topic would be to by analysing pre and post acq position of the acquirer, however, i have chosen an acquisition that was finalised in December last year therefore i am only left with 10-11 months post acq period.

Can i set the objectives such that this post acq period is not a problem?

@ashir – the key question you need to ask yourself is ‘Is there sufficient material for me to do a proper analysis?’

As I point out in my article on evaluation and analysis on our homepage http://www.opentuition.com/obu you have to do more than just report findings (as this would really only be doing a research project and you are tasked with doing a research and ANALYSIS project).

Normally several years figures allow for some analysis of the post acquisition position. So if you don’t have these you will have to establish what are you going to do some original analysis on?

Hi Ashir

You have obviously thought about the topic and you have some sound ideas and your suggestions for analysis seem quite reasonable. What you are proposing to analyse would constitute original analysis as you will be doing some of the calculations yourself and considering the various financial impacts yourself (supported where appropriate by referenced articles I trust).

You might also be able to do some analysis of the impact on the various stakeholder groups (employees, shareholders, customers) . This would allow you to apply a stakeholder model. You have suggested using Forcefield analysis, PEST and a SWOT so don’t worry if you don’t have sufficient words for yet another model – I mention it merely because some markers are mad about models!

As always I suggest that you use clear graphs to present the findings visually where this is feasible. This then means that you don’t need to repeat and waste words in telling the reader what they can already see from the graphs/ charts. Visual graphics help break up the text and make work more interesting if used appropriately (although some Far Eastern students go over the top and include lots of pictures!). So good relevant graphs and charts are a very sensible idea (however for anyone reading who may have crammed lots of photos and pictures in their report – your work will appear tacky and unprofessional – academic work is about factual information and not about producing something like a children’s picture book which it will not impress the academic markers).

@ashir -well done you for tackling a topic with minimum help. It is a shame that you can only get a 2.2 max but you certainly seem to be packing a punch with your proposals above.

If you can do all of that I think you should be fine. A main concern though is the word limit – as I think you will run out of words – so use graphs and charts wherever you can and don’t waste words repeating everything the graph already shows (just only mention those figures that are significant)

You asked about a model in your first paragraph. You have a few already including ‘Synergies’ (which you mention later). You could outline a few expected synergies and then assess whether they materialised.

I can’t really add much. Don’t overlook the SLS and Presentation and if in doubt about referencing consult our Ultimate Guide on our homepage. Good luck! 😀

Interesting question as some of the Topic titles and/or some of the circumstances overlap so it is not always clear cut. Hard for me to tell you what to go for but my ideas on the two are as follows:

I feel with T14 there needs to be some sort of cost benefit analysis as the main focus of the analysis. Often it relates to a firm investing in a new product or market or a combination of the two. The best one I saw (the student worked for the company and so had access to all the background and data), was about Landrover’s decision to invest in an entirely new car (the Evoque) to both update its range and steal customers away from BMW and Audi. The success of this strategic decision even surprised the company!

With T19 the objectives are broader in that synergies come into play the new whole expecting to be more than sum of the 2 parts. The benefits extending to access to a different and/or wider market, increased market share, economies of scale, new expertise and competencies and of course profit maximization. The down side might be the fall out on the culture, staff uncertainty because of restructuring etc.

Unless you really want to annoy the marker do not load ANYTHING after the Conclusions and Recommendations in your report. For a start it messes up the automatic word count and any appendices in the same file would mean they would have to keep scrolling back and forth (rather than simply just switch between windows). Anything which causes them inconvenience is not going to endear you to them! You load the rest as individual separate files including the Excel file used for graphics and calculations, separate ref list and one for appendices (combined if poss for appendices because again a file for each appendix would both take time for the marker to open and drive them nuts!)

Part 1 is an intro with objectives and research questions. Part 2 is about how you propose to go about it all and the limitations of the data and issues in that respect. Part 3 is about stating then analysing and evaluating what you found. Then you round off with conclusions which should summarise key findings and relate back to the initial objectives.

Every fact, opinion or the work of others needs to be referenced so see the OT Ultimate Guide to Referencing your RAP on our homepage as it particularly the Golden Rules are designed to iron out most problems