Different Methods of Acquisition for Hamilton Ltd

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ADVANCED FINANCIAL ACCOUNTING

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Question 1:
Memorandum:
Date: July 12, 2019
To: B
From: A
Subject: different methods of acquisition
Aim of the memo:
The main aim of this memo is to list down the ways through which Hamilton Ltd would be
able to use the patented technology of Orange Ltd.
Introduction:
The company Hamilton Ltd wants to use the patented technology of Orange Ltd. Though the
company Hamilton limited could go for the acquisition of 35% shares of Orange limited but
still it would not give Hamilton an entire control over the assets of the company. Hence, we
would recommend the acquisition of 80% shares of Orange limited.
Also, the company has the following options available:
Options available:
Mergers and acquisitions take place when the business combines with another company for the
purposes of achieving the objectives of the company. In this case, the company goes onto purchase
the assets, liabilities, the business segments or the subsidiaries of another company. When there is a
merger, then the company purchases another company in its entirety. In both of the cases, there is a
union of the businesses. The following are the steps that are followed in it:

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 A business combination can be identified. The main aim of it is to achieve some
synergy. In this case, the acquirer is able to assume some control over the acquiree.
There are many strategies that are available with the business such as the legal,
taxation or other businesses that could be used for the purposes of structuring the deal
of merger and acquisition. When it comes to the analysis of the merger and
acquisitions, the most common method which is followed is the acquisition method in
which the company which is being acquired is called the acquirer. In this case, the
acquirer assumes the control over the assets and the liabilities along with some of the
other business pieces.
 The second step is that of the identification of the acquirer. In this, the acquirer is the
company that takes control over the acquire.
 The third step is the measurement of the cost of the transaction. It comprises of the
fair values as on the date of the acquisition. This fair value is of the assets, liabilities
that have either been assumed or have been incurred and of the equity instruments that
have been issued by the acquirer along with the costs that are directly connected with
the business combinations. The date of the acquisition is the date on which the
company which is acquiring takes over the company which is being acquired. All of
the assets and the liabilities are then reported at their respective fair values as on the
date of the acquisition.
 Then there is an allocation of the cost of the business combination. There is an
allocation of the costs of the business combination by the way of recognising all of
the assets, liabilities and the contingent liabilities of the acquire. The assets and the
liabilities would be recorded if they satisfy the criteria for recognising the fair values
as on stated date (Corporate finance institute, 2019).