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Multinational Acquisition - Research Paper Example

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Multinational Acquisition

In 2010, the world witnessed the acquisition of a famous multinational company Cadbury by Kraft Food Products. Kraft Foods, an American multinational, which deals in food products acquired Cadbury, a British multinational dealing in confectionary products, as a way to diversify its holdings. As such, in January 2010, Kraft Foods acquired Cadbury for ?11.9 billion ($19.6 billion) (Merced & Nicholson, 2010). This made Kraft Foods the biggest confectioner in the world. It has been recorded as the biggest food and beverage deal in European history according Reuters. The initial offer of Kraft Foods was 745p, per share which was increase by 14 percent to 850p per share. Initially the acquisition was opposed by the trade unions because they had the prescient concern that such an acquisition would necessarily lead to job cuts. However, Kraft Foods confirmed that the combined company would be able to create more jobs in UK, apart from the existing employees that Cadbury currently employed (Jones, & Dorfman, 2010). Research Objectives The objective of this research is to focus on the issues that arise after a multinational acquisition acquires a different organizational culture, framework, process and system in comparison to the company which has acquired it. The motive would be to analyze the accounting requirements after acquisition, difficulties that arise with reference to preparation of combined financial statements, as well as to separately assess the goodwill of the business combination and other key issues. The objective would also be to study the IFRS and GAAP guidelines which are applicable in cases such as the one that will be studied. Outline of the Study The research study includes a detailed study of the multinational acquisition of Cadbury by Kraft Foods. General analysis of the scenario before acquisition is done; furthermore, the study will discuss the after effects of acquisition within the new business combination. As such, the study will begin with a brief overview of the acquisition that took place in January 2010. The research objective is stated to describe the motive behind conducting the research. Furthermore, a literature review will include analysis of the accounting requirements and the challenges faced by the company in preparing the combined financial statements. Apart from this discussion on the process of evaluating the intangible assets of the company and key changes that are made in the acquired company would be revealed, the study will attempt to give a complete view of the successful objectives required by such an approach. LITERATURE REVIEW Accounting Requirements and Challenges in preparing Financial Statement In the case of the acquisition of Cadbury by Kraft Foods, the holding company is Kraft Foods and Cadbury is the subsidiary. Therefore, the companies in this business combination need to apply for acquisition accounting to the newly united business. Similarly, the holding company is the one which holds majority of the shares of the subsidiary company. The holding company must also become responsible for the balance sheet and profit and loss statements of the subsidiar ...Show more

Summary

Multinational Acquisition Table of Contents INTRODUCTION 3 Overview 3 Research Objectives 3 Outline of the Study 4 LITERATURE REVIEW 4 Accounting Requirements and Challenges in preparing Financial Statement 4 Evaluation of Intangible Assets 6 Analysis of Special Issues in New Business Combination 7 Key Areas of Differences in the Acquired Company 8 References 10 INTRODUCTION Overview Multinational Acquisitions are common nowadays due to the turbulent global economic scenario which provides a very uncertain future for firms throughout the world…
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