- March 10, 2018 at 1:25 pm
Hi, I have chosen topic 19 but I have a few questions/ clarifications and I would really appreciate your help.
For premerger analysis I plan to do a swot and financial analysis. can I focus the premerger analysis on the acquired company as I have not been able to get the acquirers financial statementsfor the years before the merger as the company was private before the merger and did not publish its financial statements.Reading through your replies to questions from other students you suggested that the swot should tie in with your financial analysis and ultimately help you meet your research objectives. one of my objectives was to determine why the acquirer acquired the target company but if I cannot perform premerger analysis on the acquiring company how do I meet that objective?
In addition to the swot and financial analysis I am considering doing either Johnson and scholes SFA model or Force field analysis. Can you tell me which of the two will be more appropriate. Will using only two business models make a good RAP?
With regards to operational consequences apart from reduction of head count and closing of less efficient facilities I’m not sure what else to add and I doubt that will be enough.Will you consider different management styles as a “culture” issue?
Thanks for the helpMarch 14, 2018 at 8:27 pm
@imaan – my main concern is whether you will have adequate information to be able to do sufficient original analysis. In an ideal scenario you would be looking at the strategic reasons for the acquisition/merger and comparing post-merger/acquisition financials for the acquirer with their pre-acquisition financials (and the post HR, culture and other operational changes supplement this).
I don’t think the models on their own will be sufficient – it is not a case of using lots of models as it is normally better to use one or two well (rather than 3 or 4 superficially). Unless you can put up a good case of why the merger / acquisition strategy was undertaken and have sufficient information to assess its success (or otherwise) I don’t think this would end up being a successful project.
I am sorry if this is a disappointment, but really it is better to know this now rather than be disheartened and told your topic wasn’t really suitable in the marker feedback.
(If you are looking for a possible new topic then there should be plenty of material on Carillion for Topic 17 for a pass if you approach the topic appropriately)March 15, 2018 at 10:11 am
@traphena thanks for the feed back .i just want to give u a complete overview ofwhat I plan to do or have done so far as I feel that I did not explain myself well in my previous post.
I have done a full swot on both companies with which I plan to demonstrate suitability(from SFA model) of the decision. I mean that I have pointed out how one company’s strength can be used to overcome the others weakness or explore its opportunity.i also plan to use financial analysis to back the swot and sfa e.g. One of the strength of the acquired was high cash reserves(from cash flow statement) so this can be used to back an opportunity of doing more acquisitions on the swot and also feasibility (available resources) on the sfa
For “acceptability ” from sfa I plan to use mendelows matrix on stakeholders and analyze each category
I have written a section on the back ground of the merger where I explored the strategic reasons for the merger.two e.g. Are as follows:
1. Management expected synergies such as cost savings of 1.5 billion annually
2. The acquiring company planned to use its international presence to sell the targets company’s products
To analyze whether this was achieved i will take individual total cost for each company add them to get combined pre acquisition cost and then compare to the new company’s total expenses to see if the 1.5 expected savings was achieved.
I was able to get only 2015 financials for the acquiring company but that will give me two years results as it includes 2014 results but I will explain this as a limitation and why I only did pre merger financial analysis for only two years.
An issue I have is that I got the post merger annual reports from the security and exchange commission website submitted through form 10k which are supposed to be audited but it does not include an audit opinion so I’m not sure if it is audited or not.can I go ahead and use it?
For the international sales I plan to use the acquirers financials (segment reports)to see if the percentage of sales oversees has increased or decreased compared to premerger.
For operational results as I said in my previous email there have been some redundancies and closing of facilities.this I plan to analyze using the financials coz it has no of processing facilities and workers.i also have backings for this through analyst reports and news articles.
For culture the only thing I could think about is that the acquired company has a very hard approach to cost cutting and for e.g. There executives even fly coach so I was thinking this will affect the acquired company’s staff. They also implemented zero based budgeting which is new to the acquired company.
In summary I plan to use three models swot,sfa and mm plus financial ratios.
do you still think I’m not on the right track ? Have I completely misunderstood what I’m supposed to do?
please let me know what you think. i have done a lot of work and if I change topic I don’t think I will be able to submit in may with all my other commitments.
Thanks for the helpMarch 16, 2018 at 7:11 am
Forgot to add…I have also assessed pre merger trends eg sales growth rate etc for the acquiring company and computed some ratios .i plan to do the same for post merger results .please reply ASAP.thanks againMarch 16, 2018 at 6:40 pm
@imaan From your first post it looked as if you hadn’t got much pre-merger information. However from what you have said subsequently it does sound as it you have acquired sufficient data and information for you to be able to do some original analysis of your own and produce a project that potentially would fulfil the assessment criteria and RAP requirements.
In fact you seem have a good understanding and grasped what is required with your plan to demonstrate strengths/ opportunity from the SWOT Outline the reasons for the merger/acquisition and identify the strategies and then go on to do analyse the subsequent position
The cost information and pre-merger sales information would be very useful for your analyais(do you have both companies figures for sales?). This and profit, gearing and share information would then allow you to make comparisons with the post merger situation as that in turn will help you form an opinion, backed up by evidence, of whether the merger / acquisition has been successful.
There is no problem using several models as long as they are ‘adding value’ in helping you build up a strong evaluation (sometimes students just put in lots of models that are not really making a valid contribution to advancing the analysis and end up being just a waste of words). Overall however you seem to be putting together a well thought through project and as long as you reference adequately and keep within the word count there is a good chance it will get a decent grade – so well done so far!March 20, 2018 at 8:15 pm
@ traphena thank you very much for the feedback. I am very grateful.i have an issue I need clarification on and will really appreciate your help.
The merger I’m basing the RAP on happened early to mid 2015 so my premerger years are 2012,2013 and 2014.however the acquiring company was itself acquired in mid 2013. As a result of the 2013 acquisition the company’s year end was changed by the new owners from April 30 to dec 31.the financials therefore include a full year 2012 result (ending 28 April 2013), 9 months results( 29th April-31 dec 2013) and full year 2014(Jan-dec 2014)
The nine months (2013 results) is known as the transition period which includes certain expenses relating specifically to the acquisition which I believe may distort the true picture of expenses trend
My question now is how do I compare like for like if 2013 has only 9 months results?do I improvise by doing an estimate of the fourth quarter based on the average of the 3 quarters and explain my limitation and why i had to improvise?
In relation to the acquisition expenses Should I adjust the reported expense amounts with the acquisition expenses to eliminate them in my analysis or include them as part of the reasons for the trends?
Thanks again for everything.you cannot imagine how much your feedback has helped me.March 23, 2018 at 7:29 pm
i have really found this forum helpful, i’m not clear on the requirement to base my project on recent organisational activity or processes rather than historical events. i want to do topic 19 and i’m intending to submit in November 2018, however the merger started in 2015 and the completed in mid 2016. Both companies reported separate financial statements for 2015. i have a good information of both pre-acquisition and post acquisition for both companies but before i proceed i want to know if this meets the recent activity.March 24, 2018 at 10:14 pm
@traphena I went through the financial statements again and I noted that to assess performance the p&l was restated after the year end change.it includes three p&l
The first one compares 2013 and 14 performance and the p&l was prepared for the 12 months period to 31 dec 2013/14(52 weeks )
The second compares 2013 and 2012 the p&l was prepared for the period April to dec 2012/13(34 weeks).
The third one is explained in my previous post
My question again is how do I establish the trend for three years when each was based on different period(lengths).
Do I show trend for each of the two periods separately and do my analysis separately as the company has done?I mean for eg do one graph showing 2013- 2014 and another showing 2013-2012 and do my analysis for each based on the periods ?
Or do I do one graph with all three results and one analysis (but in this case 2014,2013will be for 52 weeks while 2012 will be for 34 wks)
I don’t know if I make sense but I can send you the financials through email if you don’t mind looking at it so that you can understand what I’m trying to say if this post is not too clear.April 9, 2018 at 6:06 am
Apologies for the delay in responding – I have been away fir a couple of weeks.
You can turn everything into ratios using the figures from the reports you have as ratios obviate the need to do adjustments. Make it as simple and easy for yourself – by using ratios you should then be able to do line graphs from them giving you trend linesApril 17, 2018 at 9:15 pm
Thank you for responding and for all the help. I don’t see how I could have come this far without this forum. I have a further clarification though.
In your response above I think you are saying the ratios obviate the need for adjustment. I don’t quite get it . For eg calculating the ratio I noted that for eg in calculating asset turnover using sales of 34 weeks( lower) gave a lower ratio as compared to using sales of 52 weeks( high amount).wont this distort my analysis?
Also in another forum you stated that it is better to discuss continuous trends eg 2012-2016 but in my case I haven’t done that because I thought comparing 52 weeks against 34 weeks will not be correct. I have compared 2014 vs 2013 and 2013 vs 2012. This resulted in using more words so I am desperate to rectify the situation if there is a better way out. Please respond and thanks againApril 18, 2018 at 8:57 am
Yes I see the problem here as with asset turnover you are using P&L figures for 34 weeks and 52 weeks over the same balance sheet denominator. So no ratios won’t work in this scenario (however they would where you are using a denominator that similarly relates to P &L 34 weeks e.g. GP or NP.
Your only alternative is to priorate the P&L figures to turn them into 52 weeks if you really want to use balance sheet numbers as part of the ratio calculations.
Comments have be interpreted in the context given. Continuous trends would normally be appropriate for Topic 8 as business strategic decisions may affect more than one year. Mergers and acquisitions are extreme strategic decisions and in Topic 19 it is the effect of these specific decisions you need to evaluate. The consequences of a merger/ acquisition will impact on many areas of the business not just financial performance so the analysis needs to be as ‘holistic’ as possible.
I am not so sure how relevant comparing 2013 with 2012 is for a company being studied in 2018 so ask yourself (a) is this section adding value? Or (b) am I just including it because I am following a routine approach? Obviously if (b) chop it out.April 19, 2018 at 1:43 am
Hello Traphena, many thanks for your reply. The merger I’m basing the RAP on happened mid 2015 so my premerger years are 2012,2013,2014.I agree with you maybe I’m adopting a routine approach as I thought I need to do three years pre and post merger. I can exclude 2012/13 and explain why I excluded it ( the restatement for a shorter period ie34 weeks etc) as a limitation but wont I be penalized by the markers for not doing three years? Or do you think prorating is better as you also suggested?
Also I am really running low on word count so I was thinking of abbreviating some key words I have used a lot in the rap. eg the first time I mention Berkshire Hathaway I put (BH) in bracket and then write BH any other time I want to mention them. Is this okay?
Thanks a million. God bless you ma!April 19, 2018 at 4:49 pm
I think the post merger years are quite important as they help you to assess the success / issues / highlights and / or failure of the merger / acquisition whereas the pre-merger years merely indicate what may have led to the decision.
As always it Is original analysis and critical thought that will drive your grade.
You can always show the trendline for several years pre merger but don’t waste too many words other than state the case for the decision and the main factors behind it.April 28, 2018 at 9:42 pm
Thanks Traphena! think I get it now..one more question tho as I’m about to rap up.
In my ratio analysis when stating the reasons for the trends I’ve used words like “may ,could etc) eg the increase in sales may have been as a result of xxx.is this correct or should I state the reasons as facts like …the increase in sales was as a result of xxx? I think I read along those lines on someone’s marker feed back on the “marker speaks” forum but I can’t seem to be able to find the post anymore to clarify.thanks again for your invaluable input and helpApril 28, 2018 at 9:56 pm
Also do I need to follow the structure in the info pack?to save on word count I did not do research questions even tho I have research objectives.
Because I needed more words for the analysis section I did half of the recommended words for section 1 and 2.would I be penalised for this?
Thanks againApril 29, 2018 at 11:57 pm
Markers are a bit cagey about may have / could be etc. – they call it being ‘speculative’ and think you should do adequate research to come up with more definite reasons.
The Info pack is a guide. I always advise if short of words focus on the evaluation and analysis and cut out what is unnecessary in Parts 1 &2. If you can squeeze in some research questions it might be a good idea. The other area where words are wasted is repeating what every graph already depicts – it drives some markers nuts too apparently (and once on some feedback I actually read something like ” most of your commentary kept repeating percentages which, because I am not blind, I was perfectly capable of seeing for myself”)April 30, 2018 at 10:38 am
Thanks very much for all d help.i will try to do a few research questions and also read through to ensure I’ve not made any of the mistakes u have highlighted.
You must be logged in to reply to this topic.