hi, i am discussing a M & A problem with a friend and would like to ask for some help. If there are two companies A and B, last year's profit of A is significantly lower than B. However, A has a higher growth rate. If you have a copmany and need to choose either to merge with A or B which one be your choice and why?
also if a company has a low profit when you merge with it do you have tax gains? if so could you please explain to me why. Thank you so much!
引用(windfull @ 26 Sep 2006, 14:27) 
hi, i am discussing a M & A problem with a friend and would like to ask for some help. If there are two companies A and B, last year's profit of A is significantly lower than B. However, A has a higher growth rate. If you have a copmany and need to choose either to merge with A or B which one be your choice and why?
also if a company has a low profit when you merge with it do you have tax gains? if so could you please explain to me why. Thank you so much!
If i were the manager, i would purchase A instead of B. Follow the rules of buying in stock, buy potential star but buy cashcow. Not sure about whether the merging with low profit co. would make tax gains. But u need to explain in what context this happens, too general.
You buy cash cow only when you are doing a private equity LBO deal, because the first and last thing you care about is positive EBITDA, and hence the firm's ability to service the debts. The way you model a Merger case (Aquisition financing) is essentially the same, however the acquiror is more interested in the synergies that would be created in the merged business in order to create values for the shareholders.
These are the very basics hence are almost compulsory for anyone works in Finance. Obviously those who apply for IBD jobs might be lucky to get this sort of questions at assessment centres.
These are the very basics hence are almost compulsory for anyone works in Finance. Obviously those who apply for IBD jobs might be lucky to get this sort of questions at assessment centres.
引用(verona @ 2 Oct 2006, 22:46)
You buy cash cow only when you are doing a private equity LBO deal, because the first and last thing you care about is positive EBITDA, and hence the firm's ability to service the debts. The way you model a Merger case (Aquisition financing) is essentially the same, however the acquiror is more interested in the synergies that would be created in the merged business in order to create values for the shareholders.
These are the very basics hence are almost compulsory for anyone works in Finance. Obviously those who apply for IBD jobs might be lucky to get this sort of questions at assessment centres.
引用(windfull @ 26 Sep 2006, 15:27)
hi, i am discussing a M & A problem with a friend and would like to ask for some help. If there are two companies A and B, last year's profit of A is significantly lower than B. However, A has a higher growth rate. If you have a copmany and need to choose either to merge with A or B which one be your choice and why?
also if a company has a low profit when you merge with it do you have tax gains? if so could you please explain to me why. Thank you so much!
you should first ask more questions, before making assumptions.
firstly, what are the market capitalisations of company a and b? if a company is worth only 1 pound, even if its profit is 100%, it's probably of little interest to you.
what industry are we talking about? online gambling and real estate are probably very different in their m&a strategies.
there are other questions which would drive critically what the answers you might arrive at.profit lower - if in percentage terms, are the absolute values similar? and vice versa?
growth rate higher - is that in terms of revenue? or is it in terms market share? or is it in terms of human resources?
as the question on tax gains, this is more for an accountant to work out for you. probably need to hire pwc or kpmg to work this one out.
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