1.1 Part A
Business combination is bringing two or more different entities or businesses together in one reporting business and the acquirer obtain the control over the acquire business. It was made by AASB under section 334 of the Corporation Act 2001 on 8th march 2008.Under the corporation act 2001 there are two principal methods of acquiring a business which are Takeover offers’ and ‘scheme of arrangements’
Takeover offers
Takeover offer is a corporate act in which acquiring business makes an offer to target business shareholders to buy their shares to obtain control over the target business. It can be done both in friendly and hostile way. There are 2 types of takeover bids: off-market bids and market bids.
Difference between market and off-market bids are as follows:-
• Consideration-in market bid only cash consideration is taken into account on the other hand in off market bid any type of consideration including cash or securities can be used.
• Conditional/unconditional-an market bid offer must be unconditional whereas an off market bid offer maybe subjected to conditions which neither are nor prohibited by ss626 to 629.
• Improved offer-Under a market bid ,an increase in consideration is not passed to those who have already accepted the bid while under an off market bid if an improved offer is received then those who have already accepted the bid are entitled to increase (s650B(2)).
• Quoted or unquoted securities-A market bid can only extend to quote securities, whereas off-market bids may be for quoted or unquoted securities.
• Bid class-Offers under a market bid must be for all the securities in the bid class, on the other hand an off-market bid may specify a proportion of the securities in the bid class to which th...
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• Giuliani, M., & Brannstrom, D. 2011. Defining Goodwill: A Practice Perspective. Journal of Financial Reporting & Accounting (Emerald Group Publishing Limited), 9(2), 161-175.
• Reams, K., Shanda, L., Tobin, J., & Liu, W., F. 2014. Acquisition Premiums and Cost Sharing Analysis,
• Available: http://www.internationaltaxreview.com/Article/3300938/Acquisition-premiums-and-cost-sharing-analysis.html (accessed 6 May 2014)
• Ryan, S., G., Herz, R., H., Iannaconi, T., E., Maines, L., A., Palepu, K., Schipper, K., Schrand, C., M., Skinner, D., J. & Vincent, L. n.d. American Accounting Association’s Financial Accounting Standards Committee Response to FASB Request to Comment on Goodwill Impairment Testing Using the Residual Income Valuation Model,
• Available: http://aaahq.org/about/committee/fasc/goodwillimpairment.pdf (accessed 7 May 2014)
The second section will be a report to the board of directors that identifies a synergistic acquisition candidate for Target. This section will identify Target's proposed acquisition terms, price, financing, and potential negotiation strategies. This segment will also include price / earnings ratios, book value, current market value, and liquidation based on the supporting financial data. Also in this part will be a discussion of the general and specific risks inherent in an acquisition strategy.
-Conditional acceptance: includes new terms that are not contained in the offer (viewed as new offer that must be accepted).
The carrying value of goodwill and many other intangible assets was 28.1 billion and 9.8 billion as of December 31,2014. Goodwill unswervingly impacts the asset turnover ratio by cumulative amounts, hence the reason why it is incessantly beneficial to grasp what the adjusted total asset turnover is and how it compares to other businesses within the industry.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Before the merge was executed there was premerger notification given to the involved partners of the merger. To execute the merger, there needs be executive signing of forms by all involved parties. The forms include FTC and DOJ which are also referred to as ‘filling of HSR form’ also known as ‘Notification and Report Form’ used in mergers and acquisitions (F.T.C, 2011). To attain the merger the government had to intervene and bring the intended companies together.
A Share Market which is like a Stock Market. The key contrast is that a stock market offers you some assistance with financial purposes like securities, bonds, mutual funds, etc. A Share market just permits exchanging/trading of shares. A Share Market is a place where the shares are either issued or exchanged.
It was the year 1987 when the Gartner Group popularized the form of full cost accounting named Total Cost of Ownership (TCO)(author, Gartner Total Cost of Ownership). Originally TCO was mainly used in the IT business sector. This changed in the 1980’s when it became clear to many organizations that there is a distinct difference between purchase price and full costs of a products ownership. This brings us towards the main strength of conducting a TCO analysis, besides taking the purchase costs into account, which consist of the amount a money an organization pays for the required service, product or capital outlay. It also considers 1. Acquisition costs; these can consist of sourcing, administration, freight, and taxes. 2. Usage costs, which consists of the costs associated with converting the given product or service into a finished product. And finally 3. End of life cycle costs; the costs or profits incurred when disposing of a product. TCO can be seen as a form of full cost accounting; it systematically collects and presents all the data for each proposed alternative.
Lange, Fornaro, and Buttermilch (2015) focused their research on the FASB Accounting Standards Update (ASU) 2011-08, in regards to Intangibles – Goodwill and Other: Testing Goodwill for Impairment. The authors elaborated on how reporting has been done in the past and how the changes made for private companies has helped ease the financial reporting of goodwill. In addition, the authors discussed the definition of a public business entity. This helps to allow private companies to determine the proper way to report their financial
Unilateral – some offers are purely one sided, made without the offeror’s having any idea whether they will ever be taken up and accepted, and thereby be transformed into a contract. For example when an advertisement where a person is rewarding another one if he finds his pet (which was lost). In this case the person who is making such an offer is not sure whether this offer will be ever accepted.
English auction (EN) – where bidders outbid each other until no-one else is willing to bid against the current bid. The participant who placed the current bid wins the auctions and pays the bid amount.
According to Florida Incorporation, a merger is the statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. An acquisition is obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets (Florida Incorporation, 2006).
Float Shares in the Market Place – Floating shares can be identified simply as the shares of a public entity that are available for trading in a stock market. An advantage of this source of funds is that the entity gets access to new capital that can be used in developing the business. Although its disadvantage is that the shareholders’ interests may differ from the company’s interest or objective.
Goodwill can be classified into purchased' and non-purchased goodwill'. Rohan defines the difference between the two as follows:
Markets exist for the vast majority of goods and services. Markets can be defined broadly or narrowly. For example there are the consumer goods, capital goods, commodities, financial and labor markets. Each of these broad categories can be broken down into more specific markets. For example within the financial market there are markets for foreign exchange and for long term loans, within the corn modifies market there are the markets for corn and copper and within the consumer goods market there are the markets for clothes and cars. Prices usually play an important role in these markets.
This is called an agreed merger. Another situation is where one company seeks to control another without its agreement. This is called a hostile takeover. To avoid a hostile takeover the target company may seek a 'white knight', another company with which it would prefer to merge. It is up to the shareholders of the target company to approve a merger.