Mergers and Acquisitions Data for AECOM Company - Essay Example

Acquisitions and Acquisitions (AECOM) Chapter 3 Introduction The data relevant to the acquisition that gave rise to AECOM Companywas collected and analyzed to ascertain the aspects that caused the acquisition. In addition, the data was used to examine the effects of the acquisition to the company and the competitors at large. Similarly, the data collected provided a real basis for making an opinion on the state of acquisitions and the possibility of such acquisitions creating a positive of negative effect on the company. This was made possible through the comparison of the data of AECOM and its two major competitors for the period of one month before and after the acquisition 3.0 Data presentation AECOM Data Graph 1: Effects of the acquisition on the Revenue, Income and profit margin of AECOM, before and after the acquisition Source: Finance Yahoo (2015) Graph 2: balance sheet of AECOM Graph 3: effects of the acquisition to the firm’s operating, financing and investing synergy Graph 4: effect of the acquisition on the revenue, income and profit of LON: BBY Graph 5: effect of the acquisition on the debt, assets and debts to assets of LON: BBY Source: Finance Yahoo (2015) Graph 6: effects of the acquisition on Operating, Financing and Investment synergy of LON: BBY Source: Finance Yahoo (2015) Table 1: Jacobs Engineering Company comparison prices of stock Date Open High Low Close Volume Nov 17, 2014 47.54 47.54 46.94 47.23 1,071,457 Nov 14, 2014 47.36 48.07 47.21 47.69 1,080,185 Nov 13, 2014 48.21 48.47 47.06 47.48 928,441 Nov 12, 2014 47.41 48.50 47.40 48.40 1,037,511 Nov 11, 2014 47.51 47.81 47.29 47.58 934,092 Nov 10, 2014 48.07 48.54 47.33 47.62 1,212,812 Nov 7, 2014 48.02 48.49 47.87 48.26 1,061,044 Nov 6, 2014 48.06 48.41 47.69 47.92 977,766 Nov 5, 2014 47.27 48.15 46.82 47.93 1,127,109 Nov 4, 2014 46.92 47.27 46.49 46.84 1,577,935 Nov 3, 2014 47.43 47.61 46.99 47.07 1,038,565 Oct 31, 2014 47.68 48.04 47.25 47.45 1,473,048 Oct 30, 2014 46.98 47.60 46.50 47.15 961,888 Oct 29, 2014 47.39 47.54 46.75 47.19 1,283,114 Oct 28, 2014 47.18 47.51 46.89 47.40 1,673,861 Oct 27, 2014 47.14 47.46 46.63 47.03 784,623 Oct 24, 2014 47.24 47.40 46.61 47.36 688,907 Oct 23, 2014 46.03 47.70 46.03 47.31 1,251,175 Oct 22, 2014 46.69 46.86 45.71 45.71 752,220 Oct 21, 2014 45.55 46.82 45.47 46.64 1,478,304 Oct 20, 2014 45.74 46.10 45.27 45.40 1,277,604 Oct 17, 2014 45.79 46.14 45.46 45.96 1,857,135 Oct 16, 2014 45.86 46.72 45.04 45.23 2,792,054 Oct 15, 2014 45.88 46.98 45.13 46.72 1,899,550 Oct 14, 2014 46.65 47.64 46.26 46.70 1,626,520 Oct 13, 2014 46.79 47.45 46.22 46.25 1,684,609 Oct 10, 2014 47.23 47.56 46.40 46.71 1,895,575 Oct 9, 2014 47.90 48.10 47.09 47.25 1,578,222 Oct 8, 2014 47.14 48.02 46.76 48.01 1,891,295 Oct 7, 2014 47.01 47.72 47.01 47.16 2,200,910 Oct 6, 2014 47.36 47.94 46.99 47.34 1,227,579 Oct 3, 2014 47.06 47.58 47.02 47.25 1,372,871 Oct 2, 2014 47.20 47.48 46.24 46.88 1,848,323 Oct 1, 2014 48.81 48.81 47.26 47.35 2,194,906 Sep 30, 2014 49.37 49.84 48.58 48.82 1,354,378 Sep 29, 2014 49.39 49.94 49.25 49.32 1,370,672 Sep 26, 2014 49.42 49.82 49.13 49.68 966,080 Sep 25, 2014 50.19 50.37 49.36 49.52 1,380,486 Sep 24, 2014 50.96 51.00 50.18 50.34 1,363,459 Sep 23, 2014 51.57 51.59 50.86 51.02 1,765,077 Sep 22, 2014 52.43 52.45 51.59 52.15 1,513,370 Sep 19, 2014 53.36 53.45 52.43 52.52 925,935 Sep 18, 2014 52.85 53.09 52.60 53.03 918,014 Sep 17, 2014 53.44 53.81 52.73 52.77 1,000,914 Source: Finance Yahoo (2015) Graph 7: Comparison of JEC and AECOM Source: Finance Yahoo (2015) Table 1: BBY Comparison to AECOM in terms of stock prices. Date Open High Low Close Volume Nov 17, 2014 155.80 157.98 154.20 155.80 1,982,404 Nov 14, 2014 158.90 159.20 153.60 156.90 1,984,440 Nov 13, 2014 159.40 161.20 158.60 158.70 1,233,446 Nov 12, 2014 161.20 162.70 157.40 159.80 1,423,981 Nov 11, 2014 165.20 166.20 161.20 163.40 2,148,246 Nov 10, 2014 161.50 166.40 161.09 165.30 3,510,833 Nov 7, 2014 156.10 162.60 155.70 161.80 2,571,125 Nov 6, 2014 150.60 158.70 150.32 155.90 1,639,638 Nov 5, 2014 154.60 156.10 152.80 153.30 1,689,047 Nov 4, 2014 153.90 156.90 152.90 153.30 1,732,932 Nov 3, 2014 153.40 156.71 152.40 154.50 1,425,941 Oct 31, 2014 154.30 155.70 152.50 153.70 2,625,673 Oct 30, 2014 154.40 155.40 147.95 153.00 3,568,949 Oct 29, 2014 157.90 161.20 154.00 154.60 3,165,250 Oct 28, 2014 157.60 159.80 157.60 158.50 1,404,290 Oct 27, 2014 158.60 159.50 154.90 157.10 1,802,387 Oct 24, 2014 159.00 160.40 156.30 157.70 1,597,614 Oct 23, 2014 161.00 161.50 157.70 161.00 2,143,244 Oct 22, 2014 165.70 166.62 160.60 161.80 2,258,199 Oct 21, 2014 160.20 166.61 159.20 165.70 1,869,935 Oct 20, 2014 163.80 165.09 159.70 160.70 2,101,367 Oct 17, 2014 158.30 164.80 157.25 163.10 2,934,437 Oct 16, 2014 157.90 161.80 152.88 158.40 5,524,977 Oct 15, 2014 159.90 169.70 153.50 156.50 7,450,282 Oct 14, 2014 151.90 154.70 145.59 148.70 3,600,955 Oct 13, 2014 150.80 156.20 150.28 153.70 3,333,500 Oct 10, 2014 153.70 155.00 151.00 152.00 2,991,153 Oct 9, 2014 158.30 161.40 153.50 155.80 3,801,928 Oct 8, 2014 168.10 168.20 160.20 161.60 4,257,700 Oct 7, 2014 173.70 174.40 167.93 168.40 3,107,267 Oct 6, 2014 177.50 179.00 173.40 174.30 2,093,575 Oct 3, 2014 179.90 180.10 176.00 176.90 3,132,706 Oct 2, 2014 185.20 186.02 176.30 179.50 3,741,046 Oct 1, 2014 188.60 190.90 184.90 185.20 3,260,171 Sep 30, 2014 191.30 193.10 183.60 188.60 6,611,200 Sep 29, 2014 180.00 191.40 168.10 190.50 13,649,838 Sep 26, 2014 224.10 227.00 224.00 224.90 2,452,046 Sep 25, 2014 220.70 222.90 219.30 220.20 1,098,950 Sep 24, 2014 222.00 222.90 220.00 220.90 1,168,326 Sep 23, 2014 225.00 225.00 220.80 222.40 940,571 Sep 22, 2014 228.30 229.10 225.00 225.60 1,003,503 Sep 19, 2014 224.70 230.40 223.50 230.20 5,359,204 Sep 18, 2014 223.00 224.30 219.40 223.50 1,683,672 Sep 17, 2014 221.80 226.00 198.70 223.60 1,989,779 Source: Finance Yahoo (2015) Graph 8: Comparison of AECOM and BBY before and after the acquisition Source: Finance Yahoo (2015) Table 2: AECOM: NYSE ACM Historical prices after the acquisition Date Open High Low Close Volume Nov 17, 2014 32.22 32.35 31.76 32.00 1,387,536 Nov 14, 2014 32.12 32.56 31.50 32.31 1,265,076 Nov 13, 2014 32.27 32.70 31.82 32.13 1,487,368 Nov 12, 2014 30.60 32.42 30.28 32.22 3,255,023 Nov 11, 2014 32.40 32.51 30.13 30.49 4,762,604 Nov 10, 2014 32.98 33.49 32.60 32.78 1,287,377 Nov 7, 2014 32.76 33.09 32.73 33.00 1,162,556 Nov 6, 2014 32.60 32.94 32.48 32.78 1,142,992 Nov 5, 2014 32.63 32.75 32.21 32.57 1,121,347 Nov 4, 2014 32.70 32.98 32.24 32.32 2,276,922 Nov 3, 2014 32.68 33.34 32.34 32.89 2,195,208 Oct 31, 2014 32.57 32.78 32.15 32.55 1,999,609 Oct 30, 2014 31.46 32.22 31.30 32.13 2,655,623 Oct 29, 2014 31.65 31.89 30.94 31.51 3,997,965 Oct 28, 2014 32.37 32.58 31.45 31.54 2,846,868 Oct 27, 2014 32.34 32.42 32.02 32.34 1,784,248 Oct 24, 2014 31.93 32.73 31.82 32.60 1,818,347 Oct 23, 2014 31.67 32.52 31.47 31.97 2,126,597 Oct 22, 2014 31.65 31.68 31.10 31.17 2,685,871 Oct 21, 2014 30.70 31.55 30.50 31.55 1,721,007 Oct 20, 2014 29.77 30.40 29.38 30.40 3,203,427 Oct 17, 2014 29.25 30.56 29.24 30.04 4,840,771 Oct 16, 2014 28.30 29.57 28.28 28.98 5,323,796 Oct 15, 2014 27.75 28.58 27.23 28.34 3,389,916 Oct 14, 2014 28.50 29.06 27.84 28.12 2,765,948 Oct 13, 2014 29.31 29.68 27.95 28.28 3,091,338 Oct 10, 2014 30.97 31.00 29.25 29.27 2,185,504 Oct 9, 2014 31.99 32.02 31.12 31.12 1,506,700 Oct 8, 2014 31.78 32.00 31.27 31.98 1,377,721 Oct 7, 2014 32.10 32.31 31.76 31.77 1,143,705 Oct 6, 2014 33.00 33.09 32.29 32.31 773,394 Oct 3, 2014 33.10 33.23 32.75 32.90 1,238,052 Oct 2, 2014 32.78 32.94 32.08 32.77 1,376,788 Oct 1, 2014 33.79 33.84 32.65 32.82 1,302,414 Sep 30, 2014 34.38 34.52 33.73 33.75 1,005,188 Sep 29, 2014 34.16 34.71 34.04 34.39 735,015 Sep 26, 2014 34.46 34.79 34.17 34.55 868,241 Sep 25, 2014 35.30 35.37 34.17 34.43 1,000,260 Sep 24, 2014 35.42 35.48 35.00 35.36 752,038 Sep 23, 2014 35.90 36.07 35.46 35.46 823,629 Sep 22, 2014 36.90 36.94 35.91 35.99 778,615 Sep 19, 2014 37.61 37.64 36.81 36.99 922,558 Sep 18, 2014 37.30 37.63 36.98 37.53 817,006 Sep 17, 2014 37.26 37.52 37.01 37.20 726,867 Graph 9: Compariosn of AECOM and ACM before and after the acquisition Source: Finance Yahoo (2015) Source: Finance Yahoo (2015) 3.1 Data Analysis Analysis of the Findings The acquisition between the two firms created a lot of opportunities for the competitors in the market to gain stability and thus pose even stronger competition in the market. Besides, the acquisition led to an increase in the shares [prices of the company as opposed to the reduction in its value as it was anticipated. Moreover, the acquisition was as a result of ACM struggling to pursue its selfish interest in the construction industry to ensure that it controls the whole market. It is evident that the primary aim of the acquisition was to eliminate other competitors from the market in order to create a free market for ACM Construction Company to dominate the market. This however did not succeed due to the poor strategies involved in the acquisition. To begin with, the Income statement of the company before the acquisition is better than after the acquisition. The company used to make a lot of profits in the past as observed by Depamphilis (2011). 3.3 Discussion of Findings In Relation To the Literature Review Since the acquisition between the two companies took place, Jacobs Construction Company has remained steady and continued to enjoy more customer base than before. There has been a significant increase in the number of share of JCE traded with a stable price of $ 23.8 and an average of 240 shares being traded daily. The income statement also signifies a decrease in diluted average weighted share from 132.18 to 126.47 by the r March 2015. This is a good indicator that the company had gained economies of scale and thus financial growth due to the competitiveness created by the acquisition of the two firms according to Bruner, (2004). The operational synergy for JCE converged and moved together in the same direction after the acquisition of AECOM. This also signifies an improvement in functionality and management of JCE as compared to the merged firm. Moreover, it means increased competition among the firms in the industry as opposed to the primary intention of the acquisition of reducing competition. It is also evidenced from the data that only the financial synergy was realized in the acquisition with the AECOM experiencing an increase in the monetary base after the acquisition. However, the operational synergy remained constant while the investment and management synergy dropped. This must have been caused by the reduced number of employees needed in the newly merged firm and the difficulty in combining the operations of the two companies that were occupying different niches in the market (Ernst & Young, 1994). In the case of AECOM acquisition of URS, the acquisition created an industry leader that delivered more from a broad global platform to more clients in more markets. Besides, the two giant company realized their need of growing their geographical coverage and market dominance in the industry. This can be revealed by their market coverage that cast no doubt to the additional value attributed to shareholders. Sometime the share [prices may be on a decline by 6.6% and later rise by more than 23% as shown in the data. The result of these effects is the increase in the prices of the other two major competitors by 4% leading to increased competitiveness in the market. This is contrary to the main objective of AECOM during the acquisition (Herndon, & Galpin, 2013). Areas of Agreement The acquisition between the two companies led to the reduction in the value of shares of the large company. In addition, there is evidence that the value of shares of the newly formed company rose from the previous value before the acquisition. This is an indicator that the acquisition created a vast pool of resources due to economies of scale and flexibility in acquiring resources. The industry created thus achieved the capability of delivering services to a broader market. It is also clear that the acquisition led to market expansion The recent successful acquisition of URS Corporation by the AECOM for a price of $6 billion with the deal being closed on October 17, 2014 was aimed at increasing the operating efficiency of AECOM as it would save up to $250 million. The resulting efficiencies will originate from their combined talents enable AECOM to serve its clients in a much better manner. In addition, AECOM would benefit from the strong market presence by URS in over 150 countries. Moreover, the succsesful acquisition made the share price of AECOM rise by 10% to $37, signifying the biggest increase in its last two years. From the data provided, it is clear that the share price continued to increase but later dropped in October. The post-acquisition effect is that the stock price slightly increased before falling again since then. Areas of Disagreement The data provided reveal that the acquisition between the tow companies to create one larger group was of benefit that disadvantage. It is also evident that the new firm did not raise their prices due to fear of being overtaken by the existing competitors in the market. Moreover, the acquisition seemed to have created new opportunities for new entrants into the market leading to an increase in number of shareholders. Besides, there is a disagreement between the data available on the acquisition between these two firms and the literature review on the trend of competition in the market. As opposed to whatever is asserted in the literature review, there has been a lot of competition created since the two firms merged. Moreover, the data presented reveals that there is a positive abnormal return of 0.59%. on the shares of AECOM. However this is contrary to whatever is being suggested by Franks, Harris and Titman’s (1991) who show that the share price performance will reveal an abnormal return of -11%. So, from these empirical results on the share price reaction of acquiring firms are contradictory. Thoughts On To Why the Results Obtained Were So In relation to the data obtained on the acquisition between the two firms, there are several factors that can lead to two firms getting into an alliance. It may be for the benefit of the two companies where they seek to acquire synergy in financial, management and operation (Miller, 2013). On the other hand, it may be due to selfish desires of one of the companies seeking the acquisition. For the case of AECOM, the reason for the acquisition was a selfish one that was aimed at ensuring that it controls the whole construction market in the global arena. This can be revealed by the fact that the company has engaged in previous takeovers that have seen so many companies being consolidated to form one major company. The main reason for the increased competition and continued increase in the price of the new firms shares in because of the negative perception that people ion the, the market developed towards the new firm (Coyle, 2000). The puzzling Results that is unexpected and Reasons. The results posted by the company were unexpected and caused a lot of puzzle in the global market. To begin with, it was expected that after the acquisition between the two firms, a larger company that would be profitable was to be realized, on the contrary, the income statement reveals that there was no significant increase in the income of the company even after the acquisition. Besides, moreover, it was expected that the synergy of the new firm improves especially after the acquisition. This was contrary to what was witnessed by the number of employees significantly reduced leading to reduced operational synergy. The same was the case with management synergy that became complicated as a result of the increased technicalities in synchronizing the management of the two firms as asserted by Stahl, & Mendenhall, (2005). Conclusion The data obtained from the financial records of AECOM Company has revealed that the wake of acquisitions and acquisition takes different dimensions. It could be in the interest of both parties to the acquisition or the interest of only one party to the alliance. For the sake of the acquisition of AECOM, it was a acquisition that was to drive the self-interest of ACM Construction Company in order to achieve its mission of dominating the industry. This has revealed that acquisitions may be beneficial if the interest is to create a significant trading partnership that lead to operational, financial and management synergies. On the other hand, if it is a mission of self-interest, then it is doomed to cause adverse effects to the company in the global market. References Stahl, G. K., & Mendenhall, M. E. (2005). Acquisitions and acquisitions. Stanford, Calif, Stanford Business Books. http://www.books24x7.com/marc.asp?bookid=10335. Depamphilis, D. M. (2011). Acquisitions and acquisitions basics all you need to know. Burlington, MA, Academic Press. http://public.eblib.com/choice/publicfullrecord.aspx?p=648807. Bruner, R. F. (2004). Applied acquisitions and acquisitions. Hoboken, N.J., John Wiley & Sons. Miller, E. L. (2013). Acquisitions and acquisitions a step-by-step legal and practical guide. Hoboken, N.J., Wiley. http://rbdigital.oneclickdigital.com. Ernst & Young. (1994). Acquisitions & acquisitions. New York, J. Wiley. Coyle, B. (2000). Acquisitions and acquisitions. Chicago, Glenlake Pub. Co. Herndon, M., & Galpin, T. J. (2013). The complete guide to acquisitions and acquisitions process tools to support m & a integration at every level. San Francisco, Calif, Jossey- Bass. http://rbdigital.oneclickdigital.com. Read More