Trenton Transmission Systems proposed merger with Roxburgh Inc Case Solution
2017 2017(8% increase)
Roxburgh Inc. also planned to install more modern equipments.
This will increase the company’s efficiency and returns on this capital investment are estimated to be quickly driven.
Combined business strategy
Through merger each company has its unique strategy that may be beneficial if acquired by the merged company. In this case Roxburgh Inc. can use outsourcing whichTTS ink was already using.Therefore, through this the manufacturing cost will be expected to be reduced as a result, more elasticity for price and profit margins which will be adjusted as per the company’s policy in increasing revenue or capturing market share through offering competitive prices.
Consideration for acquisition
The fair value of Trenton is around$300 million. The strategy is to offer bid that includes consideration price of $300 million as well as sharing half of the synergy benefits. Half of the synergy will be $178.337 million. Approximately 478.337 million is offered. In return Roxburgh can save its $12.6 million that would have incurred if it would get the technology of Trenton as well as after acquisition, Trenton would have been making net profits of $467.7 million. There fore,this will be beneficial to buy Trenton by analyzing it through different stakeholders’perspective.
As per the shareholders’ view since this will make the company grow and prosper and will yield more return whereas, they will require reducing the jobs that would be useless after merger in order to reduce cost. There will be synergy gain of $178.337 million dollars as well as they might have concern sover the investments made since the return is favorable and will be as per estimated growth. The shareholders will be willing to go with the decision.
Mergers and acquisitions directly affect the employees of the absorbed company. However, this merger will be opposed to the interest of employees if this will result in redundancy. New technical infrastructure and equipment will be introduced however, the employees may be against it in fear of lacking appropriate skills, thus becoming less valuable for the company or becoming redundant.
As per the perspective of creditors of the company, they will be in the favor if the acquiring company has a better liquidity ratio and can enhance the debt gearing as a whole.
Government has more concern on mergers because they will expect more revenues and profits and subsequently more tax however,government is also concerned about the consumer market if such merger can create a monopoly and can exploit the consumer rights.
If Roxburgh in curs the outsourcing of its activities, then this will reduce its costs and can even enhance the outsourced work. The effect on the amount to be paid for Trenton would be that if the company can learn and use this outsource opportunity and get benefits through this, then the amount that is offered for the bid can be adjusted and can be increased in relation to expected benefits that will be derived by the company through outsourcing.
The company may compare the amount that will be saved through outsourcing and can increase the bid amount according to it. However,since there is no other bidder on the market for acquiring Trenton,therefore the increment on value for consideration is not recommended…………………..
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