Accounting of Business Combination

Accounting of Business Combination 1
ACCOUNTING OF BUSINESS COMBINATION
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Accounting of Business Combination
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Accounting of Business Combination 2
Accounting of Business combinations
Economic rationale behind the acquisition
Acquisition of Adelaide bank limited helped Bendigo limited to enhance its brand
recognition by separating the brand identities. The acquiring company was able to maintain its
brand name and goodwill from their esteemed customers. Acquisition of Adelaide helped the
parent company to save on taxes by filling the consolidated statements of tax return. The
acquisition helped the two banks to avoid and reduce the rate of financial overlap. The merger
acquisition was conducted so as to bring together good different skills and experience which
would enhance their profile and market capitalization (Hilpert and Chen,2012,np)
Acquisition of Adelaide would help in decentralization of management because the
company had separate team of management which help in easy decision making and work can be
done efficiently and effectively. The other reason for acquisition was to be able to create distinct
partner and customer-centered financial services and by so doing the company was able to
generate more income (Jedin,2016,np). The acquisition was done so as to combine special skills
and experience in retail banking in order to offer quality services and therefore make good
amounts of profits
The acquisition will enable the two banks to form good financial business with
complementary services and goods to be delivered at low-level costs to their customers and in
the end create good sustainable value to the stakeholders. Bendigo acquired Adelaide so as to
increase the financial strengths, better the scale of efficiency and ability to obtain finds so as to
pursue their expansion opportunities and venture in innovation to be able to achieve its growth
targets. The acquisition of Adelaide will enable both staffs to access greater career opportunities

Accounting of Business Combination 3
in large and more diversified organization. The shareholders of Bendigo bank limited were
assured of benefits from Adelaide bank shares. The other reason for merging was for Bendigo to
be able to establish good control in the financial services (Munn, Zhang and Schimitt
2009,pp,310-328).
Incentives during the pre-acquisition dates and post-acquisition dates
Pre-acquisition dates
The incentives of the board of directors in both companies were low due to the level of
profitability of the company. The board of directors held lower-level ranks and therefore they
received low remuneration. Adelaide was a small bank and therefore the level of incentives of
board of directors was lower compared to those of Bendigo.( www.adelaide.com)
Post-acquisition dates
Looking at the incentives of the board of directors as compared to their previous earnings
they incentives have improved due to increased levels of experience for example the executive
director has experience of about 29 years. There was also increased level profits from the
company’s activities compared to the profits raised by the individual banks and this makes them
earn more incentives compared to the previous years. Some of the directors of both companies
are also the shareholders of the merger and they ended up benefitting from increased earnings
per share and in the end increasing their incentives.
Method of acquisition
The method of acquisition was through scheme of arrangements, whereby the processes
of merging between Adelaide and Bendigo needed to be approved by the shareholders of

Accounting of Business Combination 4
Adelaide in a meeting conducted in November 2007. The proposal and announcement of the
merging by the two companies was done by the board of directors and the process was approved
by shareholders and then it was taken to court for approval and before the courts approval every
company was supposed to investigate the other and if found to have provided misleading
information then there was an agreed penalty of $ 15 million shillings.
Reasons why the scheme of arrangement method was used.
This method was used so as to avoid outright insolvency and it is also cost-effective to
both banks. The banks used the scheme of arrangements method because it is legally binding and
involves the courts approval. This method allowed the banks to pay their tax arrears in a
structural way. This method of acquisition gives the directors of banks with a continued income
since it provides them with the ability to trade, as the acquisition process is taking place every
bank continues with its daily operation as it does not require closure of the business for
acquisition to take place (Srinivasan and Balsara,2014,pp,1421-1423). This method allows
merging companies to restructure and reorganize without intervention of the creditors, creditors
are assured of payment since the banks do not cease to operate it makes it even easier to pay
creditors due to pulling funds together. Adelaide bank and Bendigo bank limited were able to
restructure and they changed the company name into Bendigo and Adelaide bank limited.
Scheme of arrangement method is less expensive as compared to other methods of acquisitions
as it only requires approval of courts and that of the shareholders. This method does not give the
banks a strict deadline they should adhere to, Adelaide and Bendigo announced their merger
acquisition the year 2007 but the real acquisition was to take place in the year 2009. The banks
used the scheme of arrangements in order to protect the interests of their shareholders as this