- February 9, 2016 at 10:13 pm
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:
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
3. Availability of Information
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.
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.
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:
Hammad Ahmed Qureshi – OBU Registered Mentor.June 15, 2016 at 9:51 am
Hi Trephena, i’m about to start my project and i’m a bit stuck on how to proceed, i selected topic 19 on a recent acquisiton that happened in my country, i went through the obu forum and i couldn’t find a forum on topic 19, i would appreciate if you can provide guidance.June 16, 2016 at 8:12 am
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).July 22, 2016 at 8:25 am
Hi, was wondering if it’s possible to attempt this topic without relying on primary information? i had facebook and whatsapp merger in mind.July 22, 2016 at 12:06 pm
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 pasdingJuly 29, 2016 at 5:09 am
Hi, to start my project, i had gather information from web and found out as below:
Facebook had only disclosed whatsapp’s financial results for year 2013 and 2012. Does computing ratios based on 2 years sufficient?
I am confused whether the financial impact is on the acquirer or acquiree?
As the acquisition took place in 2014, i will not have any pre-acq financial results except for statistics on the annual user growth, monthly active user, usage ranking/mobile app ranking, and call/msg sent through whatsapp. Is this data valid for quantitative measure?
Part of the acquisition deal is for whatsapp to focus on growing users which does not contribute to Whatsapp’s revenue but for future synergies. And Whatsapp no longer charge subscription fees, so there is zero revenue contribute to Facebook. So does that mean ratios on revenue are not relevant?
For operational performance post-acq, Facebook acquisition had lead to numbers of improvements in Whatsapp’s features that give rise to the user growth.
There are several ways on how Facebook plans to monetize Whatsapp but those are not realized. Should i include the future forecast average revenue per user based on revenue opportunity?
Are balance scorecard and swot analysis appropriate business models?
Facebook has let Whatsapp to operate independently thus unlikely there is any culture crash.
Am i going to the right direction? Somehow i don’t think there are sufficient info on this acquisition. Do you think it is better to change the organisation?July 29, 2016 at 8:11 am
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.September 15, 2016 at 9:14 am
Thank you all for your help before.
The new RAP guidance is out and you must now choose a merger or acquisition which is not more than three submission periods ago, so that for period 33, the merger must have taken place after November 2013. I now need to restart my project, as i had written about a merger from 2009!
So a couple quick questions:
– As the merger is so recent, can I write about the likely consequences? i.e. the management team of the combined company is predominantly from the acquiring company, therefore the likely consequences are for the acquiring company’s culture to prevail?
– For the financial consequence, can I write about the transfer of value resulting from too high a purchase price? Or is this too loose a financial consequence?
Thanks again for your help!September 15, 2016 at 7:11 pm
@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)September 18, 2016 at 10:38 am
I did email OB and explain the situation a couple of times, and they have confirmed that they will not make an exception for me. At least I spotted this change now so at least I still have time to make the Period 33 submission dates!
You are very knowledgeable on this topic, I was wondering if you had any thoughts on my questions above? The difficulty is that with such recent acquisitions, I feel that there hasn’t been much chance for the merger/acquisition to have had a significant effect on culture.September 20, 2016 at 6:15 pm
@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.December 18, 2016 at 7:49 am
Hi, I plan to do my OBU for May2017 and I’ve chosen topic 19.
My mentor advised me to pick out companies with no subsidiaries before the acquisition took place as its easier to analyse the financial statements and that the acquisition should have taken place after 2012. In all honesty, I’m struggling to find an M&A like that.
I need advice on which companies I could use. Thanks =PMarch 27, 2017 at 8:58 am
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 ASAPMarch 27, 2017 at 9:58 am
Yes not a problem. Follow the usual outline of setting out what was expected and then analysing and evaluating the consequences.
The only issue to check is whether your timeline accords with OBU rules. If you have read through this thread you will have seen that OBU was insisting on data no more that 3 years old. This becomes impractical with this topic as the full fallout sometimes isn’t apparent for about 5 years. I think protests were raised about this and OBU has dropped the idea but just check before you invest your time.October 3, 2017 at 9:34 pm
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?October 3, 2017 at 9:35 pm
any help would be much appreciated.
AshirOctober 8, 2017 at 9:51 am
@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?October 17, 2017 at 7:10 pm
Thank you for your reply.
My RAP is based on the Acquisition of LinkedIn by Microsoft, with Microsoft being the focus of the project. I have the availability of Microsoft’s 2017 Annual report and Financial statements for post-acq period. I have been working on developing the framework for the project and after some research this is what I have come up with.
Overall framework is as follows:
I am going to analyse the key factors/ drivers that led to the acquisition by using PESTLE or ‘forcefield analysis’ as my business models.
Further I am going to analyse the key financial implications (short and long term) on Microsoft as a result of this acquisition by using the following methods:
1. Ratio analysis;
• LinkedIn’s gross profit margins and asset turnover (for revenue analysis) figures (comparing the pre and post acq figures) and as a result what it means and has meant for Microsoft
• Microsoft’s gearing ratio- as debt finance has been used for the acq hence this ratio has gone up. Again what it means for Microsoft
• Share price (EPS) variations of both the companies, pre and post acq. Impacts on Investor confidence and later for Microsoft.
2. Microsoft’s WACC calculation. Analysis of pre and post acq. How has the deal benefited M’s financial position and what are the long term consequences.
3. Tax Implications:
• Tax savings for Microsoft as a result of using debt finance, as the interest payments are tax deductible- quantifying the value to attain future tax savings
• Microsoft can set off L’s Operational losses against future profits- quantifying the value by projecting future revenues and costs. What impact will that have on the tax rates and effective tax rates that Microsoft pays in corporation tax.
And as for operational consequences:
1. Business operational synergies-
• LinkedIn data has detailed information in relation to education, employment history and who do they know.
• analysis of LinkedIn’s growth in the number of users and how Microsoft is having and can have an advantage.
2. Microsoft’s marketing strategy- M plans to use L to target the professionals and executives in the market to prop up office 365
3. Competitiveness- salesforce (also offers CRM) , aligning LinkedIn database with’Microsoft’s Dynamics CRM’ to prop up the revenue from Dynamics by targeting the executives
4. Cultural analysis- future potential clashes and reasoning for it.
I am not sure what else I could take into account for operational consequences, however, I do want to add to it.
I want to do a SWOT analysis of the acquisition deal. I am planning to this by pulling threads from financial results into the analysis along with highlighting the operational consequences.
I would highly appreciate if you could take some time out to review and let me know if I am on the track. I have read the Analysis and Evaluation articles and they have been helpful in the preparation so far however, i am not sure if the above would constitute as any original analysis.
AshirOctober 17, 2017 at 11:13 pm
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).November 5, 2017 at 12:38 pm
I hope you are well. I have been trying to make a logical structure of the RAP, however this topic is proving to be more difficult than I expected and to top all that my mentor has been of very little help.
After careful consideration and a bit of more research I have decided to approach the topic a little differently now and would highly appreciate your input. I understand that the ACCA average contributes towards the class of the degree and my average is such that I will only be able to achieve a 2:2 irrespective of the grade I score in the RAP and given the time constraint I feel I will be lucky if I even score a C and pass. Thus, keeping all of that in mind I am trying to keep it as least complicated as possible.
Following is what I plan to do now: I have stated the project objectives followed by the research questions and the approach that I plan to take to answer those questions.
Project objectives & Research Questions
1. Objective: To develop an understanding of the drivers that led to the acquisition of LinkedIn by Microsoft.
1.a. What is Microsoft’s corporate strategy how does LinkedIn fit into Microsoft’s strategic business?
This question will be answered by analysing Microsoft’s corporate strategy to understand what it was 3 years ago and how it has evolved over time. Thus, developing an understanding of how LinkedIn fit into the strategy.
– **[ I want to use business model, but don’t know which would suit the best, to cover the above approach to answer the question. If you could please help. ]**
1.b. why did LinkedIn agree to the acquisition?
This question can be answered by performing a pre-acq SWOT analysis of LinkedIn’s business position, which would provide with reasons as to how MSFT has the capabilities to be able to minimise the threats and overcome weaknesses of LKND and help it build on its strengths and realise the opportunities.
2. Objective: To determine whether the acquisition has strengthened the overall business and strategic position of Microsoft (MSFT) and set it on the path to realise its Corporate strategy.
2.a. How much have LinkedIn’s business operations grown and what contributions have been made to Microsoft as a result?
This will be answered by analysing the growth in the business operations of LinkedIn comparing pre and post acquisition position
– User growth? Monthly active users? etc
– Financial Analysis of revenue, cost and profit per segment on quarterly basis hence identifying trends: segments [Talent solutions, Marketing solutions & Premium subscription (including sales navigator- *this compliments CRM)]
– See if there has been growth in these segments, if so how has it been achieved? By minimising threats and maximised opportunity.
– projecting future growth in these variables, along with operational synergies that could be generated to improve these variables.
2.b. what are impacts on Microsoft’s of this acquisition deal?
This question will be answered by evaluating the impact of the deal on msft [(financial and non-financial) comparing with the pre acq positions] and the returns made on investment so far.
– financed by debt – gearing and interest cover ratios [ comparison with previous year and industry avg] , Dividend payments ( if more cash is needed to pay interest then less is available for dividends)
– Share price of the msft? EPS
– CASHFLOWS situation. Lknd and msft
– the acquisition has increased MSFT Market capitalisation
– Analysis of asset turnover, return on investment (ROI) on investment of ($26bn paid for acq)
– sustainable competitive advantage in relation to ‘dynamics CRM and office 365’ – (as the data acquired from LKND is unique) analyse the growth in CRM market share of msft since acq.
– Stakeholder situation can be analysed (particularly in the light of the acquisition) by applying Mendlow’s Matrix.
The results from 2.a and 2.b can be consolidated to reach a conclusion to satisfy objective 2. Thus also providing recommendations on the basis of the findings as to what course of action can be taken by msft to realise the strategic objective (found in 1.a) behind the acqiuistion of Lknd.
I have excluded the WACC, as I could not come up with suitable analysis on the basis of that calculation, other than company’s or target’s valuation, which was making things complicated. I have also excluded the tax implications of LKND operational losses as I am not entirely aware of the US tax laws to be able to calculate the figures.
If I can pursue the topic further in order achieve a pass by excluding some of the above information and add something else instead or rearranging/restructuring the information in any way or optimise the use of the business models (as i only passed p3 on the dot- 50%) please do state as I still have to type the whole RAP and have only got 10 days to go. However, I do have most of the info mentioned and have an idea of providing sensible commentary and analysis as well as no commitments till deadline.
I can totally understand if asking for a detailed feedback on the above would be too much to ask but you are the only source of validation left at this point and I am sure whatever you contribute can be relied upon. I would very much appreciate your valuable insight towards securing a pass. Please help me out with what you can i will start the typing process from tomorrow hopefully.
Thank you for reading the whole mess and for your input in advance.
AshirNovember 5, 2017 at 8:12 pm
@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! 😀November 6, 2017 at 10:04 pm
Thank you so much for your prompt reply! Your validation has restored my confidence and I feel that I can complete the project on this topic and hopefully finally obtain the OBU BSc degree.
However, as I have been typing the RAP I have noticed the stress my overall objectives place on the corporate strategy of the acquirer and then I thought if I could have just done a topic involving an analysis of a strategy of a company so I just went through the topic list again and realised that there is such a topic, topic 14. Hence, I am a bit concerned if I am deviating from the original requirement of the topic 19 by any chance?
Another aspect I wanted to gain some insight on, if possible, was the appendices and list of references. They are a part of the same document as the Research Report? If so then do I have to include the excel spreadsheet, with all the formulae intact, at the end of the research report document as an appendix? (which I don’t think I know how to but I ll find out).
Also, the slides of the presentation will be copied from power point to SLS word document?
Therefore, in total I only have to upload two Word documents??
Thank you once again for the feedback, it has honestly helped me a lot, I am very grateful ?
AshirNovember 7, 2017 at 8:39 am
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!)November 8, 2017 at 7:44 pm
Thank you for clearing all that out for me. I will try and focus on the synergistic benefits that were expected, what is generated so far and what can be achieved.
One last thing I wanted to ask was that all the information flow is going to be in part 3, right? And that I need to reference the information gathered (facts and numbers) from the online articles, annual reports and any other sources that I have used?
Thank you for all your help once again, I have achieved better clarity than I had at any stage throughout the process of RAP. 😀
AshirNovember 9, 2017 at 7:55 am
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
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