Hav Co Mark FieldingPritchard mefielding com 1 Part

Hav Co Mark Fielding-Pritchard mefielding. com 1

Part A Types of synergy Comment Relevance Operational departmental 1 HR, 1 Audit (internal & external) synergies, Yes, these ‘simple savings should be achievable) Operational synergies Sharing of distribution networks, client lists, access to restricted contracts, automation Difficult to see overlaps External financing Larger so cheaper finance may be available Possibly though the fall in P/E predicted indicates external concern over the merger Internal finance Broader range of projects to easier to invest This could bring benefits but the funds. Larger pool of funds so industries group will still be small by industry with high barriers to entry become more standards accessible Management Culture change or management knowledge mefielding. com The possible commercialisation of the culture of target will have 1 of 2 effects. 2 Either sales will increase or the scientists will leave

Part B Earnings Synergy Average earnings = 1/3[397+370+352]=373 Current value Hav (9. 24 x 2400) =22176 Average capital = 1/3 [483+466+459]=469 Strand [(16. 4 x 1. 1)x(397 x 80%)]= 5717 [373 -(469*20%)]80%= 223 Total 28000 223/7%= $3. 2 bm After [(1980+397)80%]+140= 2040 x 14. 5= 29600 Growth $1. 6 bn mefielding. com 3 So the purchaser wants to pay twice what the seller is asking for!!

Part C Strand Current EPS [397 x 80%)/1200= 26. 5 c Therefore share price at P/e of 18 = $4. 75 Option 1 (5. 72 -4. 75)/4. 75= 20. 4% Option 2 ((2. 66+9. 24)-(4. 75 x 2))/(4. 75 x 2)=25% Option 3 20 shares gives you $25 plus 1 bond gives 12 Hav shares. Therefore [((25+(9. 24 x 12))(20 x 4. 75)]/(20 x 4. 75) mefielding. com The answer assumes that the market value of the bond is $100. This ignores the conversion rights. Whether the bond has additional value will depend on whether early conversion can take place (seems no) or whether it can be traded 4

Part C Investors will generally take cash Standard take over premiums are 30% so an initial refusal should be expected Bonds are usually only taken by holders of major blocks You may want to force managers to take equity if possible so they don’t leave and set up in competition Business angels should not be allowed equity as they can build up big holdings in Hav mefielding. com 5