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William Hill Plc acquired 624 betting shops of Stanley Leisure – an Evaluation - Coursework Example
Author : lyla21
Finance & Accounting
Pages 10 (2510 words)
This research is being carried out to evaluate and present the basic motive of William Hill Plc behind acquisition deal of June 18, 2005, the impact of this acquisition on the capital structure of the company and lastly the impact of this deal on the value of the firm…
The researcher states that there are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has two choices whether to go for an organic growth or to go for acquisition or a combination of both. For organic growth, the companies generally expand their business operations by opening up new branches, adding up new product lines etc. On the other hand, for acquisitions, the companies generally purchase an existing business such that the company owns that business and in this way it brings expansion in its existing business operations. Capital budgeting is a tool which is used to evaluate the financial viability of the projects whether in the form of organic growth or in acquisitions. In this technique the future cash flows are estimated including both the outflows and the inflows pertaining to that project after which net cash flows are computed. Those net cash flows are discounted by a relevant cost of capital of the company to arrive at the present values of all the net cash flows. Those net cash flows are then summed up to obtain the Net Present Value of the project. The NPV is then used as a tool to decide whether a project is feasible or not such that if the NPV figure is positive, then the project should be accepted and if it comes as a negative figure, then that project is advised as not to be accepted. Capital budgeting also has some other related criteria for checking the viability of the projects. ...