Even though the companies had not revealed benefits and a detailed business structure for the merger it is believed that negotiations with the respective states had not reached that level. The two firms were optimistic that the merger would have built a strong case to pass to the owners of the business. This discussion will address the valuation of the two firms using various models, the motivation and strategy evaluation, the response in the security market and corporate governance analysis to seek ways of making such moves successful and establish the reasons behind the failure. Strategy and Motivation Analysis The motivation of the proposed merger were based on global rivalry, share in the market by the firms, the level of complimentarity, variation in the industrial structure like offsetting of the monopoly. BAE was also believed to be the springboard that would enable EADS to have its biggest jump it craved for in the Northern American continent (Jane's Defense Industry, 1900; p. 75). BAE has a chief role in the manufacture of military equipment as it was noted that 95% of the BAE systems total sales were related to military sales. BAE also plays a vital role in the production of military aircraft such as the Typhoon fighter and the Tornado fighter bomber. The terms of the negotiations were that EADs was to offer 35 billion Euros which was 12% bid premium even though the new ownership was to be divided on a ratio of 3:2 in favor of the shareholders of EADS. In case the term was favorable to BAE it would shape the likelihood of the merger’s success. The US state would also call for disposal of asset upon the merger strategy which was set for security review. There are no current plans to divest any of the company’s operations in the United States as a section of merger with EADS according to the spokesman of BAE (Spulber, 2007; p. 3). EADS and BAE had a deal to have cost savings without necessarily giving details in regard to the scale and the manner in which they might be generated. Amongst the potential opportunities was the potential to accumulate more sales as the network by BAE in the export markets was immense such as ties with India, Australia and Saudi Arabia which would open doors for the EADS. The benefits from the merger were meant to extend over widening markets and that the firms were to target industrial benefits and operational synergy in all joint business. The likely synergy from the merger comprised of a minimum synergy which could be derived as the value of the pre-merger of both companies + the synergy = pre-merger security value + the number of shares for the post-merger. Taking S = Synergy and taking data on 11th September where the EADS share price was 29.30Euros while the number of outstanding shares as at 31st December 2012 being 8.21 billion shares, it then stipulates that the pre-merger value for EADS was 26 billion Euros. Conversely, taking the share value for BAE on 11th September, 2012 as 4.75Euros and the number of outstanding shares on 31st December, 2012 as 3.59 billion, it applies that the premerger value for BAE is 17.05 billion Euros found as 3.59X4.75 Euros (Financial times, 2013; p. 1-7). Now; by taking the pre-merger security price = the average price of the stock prior to the merger to be EADS + BAE It concurs that
EADS-BAE MERGER CASE ANALYSIS Name Institution Date Introduction The previous declaration by BAE systems plc and EADS N.V to merge on 12th September 2012 was put off on 10th October, 2012. The two firms were made to merge based on a dual listed company structure but the discussions were put off based on various reasons…
This research will focus on the methods of valuations that Expand Ltd may use as it seeks to either merge with another company or acquire it. The report will refer to stock market valuations and how they work. This report will also discuss the recent acquisition of the Skype by Microsoft Corporation, an American multinational corporation.
The company in the year 2011 had net sales of € 13,193,000, which seems to show that the company is a large scale company. The cost of goods sold represents 30.7% of the net sales and other expenses comprise around the same of 30.6% of the net sales. The company is incurring large amount of other expenses, the expenses other than the ones directly attributable to the production of good and services which almost equals the cost of goods sold which show the company has some room for cost cutting as the other expenses in the companies can be cut down and most of the times are less than the cost of sales.
The managers of the firm aim at maximisation of the firm value. They work towards achieving an optimal debt-equity ratio that maximises the firm value. The capital structure refers to the structure of long term financing of the firm. The assets financed with the money raised from the debt sources represent the firm’s leverage position.
“A merger can refer to any takeover of one company by another, when the businesses of each company are brought together as one” (Coyle 2000, p.2). A look into the recent history proves that strategic alliance has best served the interests of many companies at the verge of extinction.
In this respect, a popular model designed by Sharpe (1964) and Lintner (1965) had explained this relationship as Capital asset Pricing Model (CAPM). The main idea of this model involves only one risk factor, the excess market portfolio return. In this model, the variation in the excess portfolio return is explained by the covariance of the market portfolio return with the portfolio return.
This power has either catapulted firms to success or further punctured companies to failure. Indeed, debts boost the capital of firms and improve financial flexibility. That, however, is realised using mechanisms that promote efficient capital structure. Firms have to be responsible in determining the debt to be acquired and the likely source of the borrowing.
foster the development of capital markets through various economic policies, legislations and by establishing suitable regulatory framework for their growth and development in the interest of various stakeholders. Stock markets reflect health of the financial sector and economy
The supplier gave a quotation for the equipment both in Great Britain Pounds and Eros. In addition, it would cost the company AED 5million to bring the equipment to the required location in the UAE. However, the transportation cost was to be paid to a UAE
The reason is exchange rates tend to fluctuate from time to time thereby changing the price of goods and services purchased from an international market. On that note, one of the must-do obligations in this assignment is to study the exchange rate
6 pages (1500 words)Assignment
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