Financial Analysis and Merger: A Study of Baby Bunting and G8 Education

This report provides a detailed analysis of the financial performance of Baby Bunting and G8 Education, comparing their results and justifying the need for a timely merger. It also includes a SWOT analysis and Porter's Five Forces model to identify strengths, weaknesses, opportunities, and threats. The report concludes with elements of the merger's value for assessing the maximum potential.

Financial analyst

TABLE OF CONTENT
INTRODUCTION..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Explaining financial performance................................................................................................3
Comparing the financial analytical results of the two companies and justifying reason for
timely merger...............................................................................................................................5
Articulation of the strengths and weakness with porter's five forces and Swot analysis.............7
Elements of merger's value for assessing the maximum potential..............................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial analysis is concerned with assessing information regarding its cash flow,
monetary position, income & expenditure, etc. so that reliable evaluation of its health can be
identified. In the current era, financial analysis is important in order to identify relevant
information of financial transaction in turn higher ability in turn strategic management decision
can be formulated. The current report will involve information regarding profitability, leverage
and liquidity ration. It will comprise detail regarding why merger is timely required to for the
companies. Presents study will involve details related to strengths and weaknesses, using Porter's
Five Forces model and SWOT Analysis of the merger and acquisition project using the
Consolidated Financial Results. Current study will highlight elements that shape the merger's
value creation and assess its potential to maximize its triple-bottom-line performance.
MAIN BODY
Explaining financial performance
Calculating ratios of Baby Bunting and G8 Education
Profitability Formulae Baby Bunting G8 Education Total
2021 2020
Gross Profit Per Profit and Loss $1,44,764 -$1,87,010.00 -$42,246
Gross Profit Margin Gross Profit / Sales 31% -24% 7%
Net Profit Before Tax Per Profit and Loss $23,257 -$2,04,177 -$1,80,920
Net Profit Before Tax
Margin
Profit Before Tax / Net
Sales 5% -26% -21%
Net Profit After Tax
(incl Comprehensive
Loss) Per Profit and Loss $17,532 -$1,87,010 -$1,69,478
Net Profit After Tax
Margin Profit After Tax / Net Sales 4% -24% -20%
Return on Assets
Net Profit Before Tax /
Total Assets 6% -10% -4%

Return on Equity
Net Profit Before Tax /
Total Equity 17% -26% -8%
Leverage Formulae Baby Bunting G8 Education Total
2021 2020
Debt to Equity Ratio
Total debt/total
equity 1.67 1.60 3.04
Debt to Asset Ratio
Total debt /total
assets 0.63 0.61 1.2
Interest Coverage Ratio
(Net Profit Before
Tax + Interest
Expense) / Interest
Expense 6.02 -13.08 -7.06
Leverage
Current Ratio
Current assets/
current liabilities 1.21 1.25 2.46
Quick Ratio
Current assets-
inventory/ current
liabilities 0.25 1.25 1.50
From the evaluation of above presented information regarding profitability and leverage
ratio it can be specified that in individual performance of G8 Education there is negative
outcome. The individual performance of Baby Bunting it can be said that its profitability and
leverage ratios are positive that is indicating that its performance is indicating strong position.
From the profitability perspective in merger Baby Bunting profitability will decline in order to
overcome losses of other company. Leverage ratio it can be interpreted that current & quick ratio

are less of first company as compared to other which is reflecting requirement of merger in turn
strong position can be achieved. By looking debt to equity and assets ratio it can be said that
merging both the company can provide benefits to mentioned companies. It provides number of
pros to the companies when companies get merged with each other in turn optimum utilization of
resources, availability of expertise, etc. can be obtained (Anthony, 2019).
Comparing the financial analytical results of the two companies and justifying reason for timely
merger
Consolidated Annual Report - Balance Sheet of Baby Bunting and G8 Education
Baby
Bunting
G8
Education Total
2021 2020
$'000 $'000 $'000
Current Assets
Cash and cash equivalents $10,884 $3,16,989 $3,27,873
Trade and Other receivables $6,921 $17,383 $24,304
Inventories $79,987 $79,987
Current tax assets $-
Other assets $3,019 $10,268 $13,287
Total Current Assets $1,00,811 $3,44,640 $4,45,451
Non-Current Assets
Plant and equipment $30,073 $87,419 $1,17,492
Intangibles $4,430 $10,55,242 $10,59,672
Goodwill $49,751 $49,751
Right-of-use asset $94,332 $4,68,655 $5,62,987
Deferred tax assets $8,154 $1,17,104 $1,25,258
Other non-current assets $987 $987
Total Non-Current Assets $1,86,740 $17,29,407 $19,16,147

TOTAL ASSETS $2,87,551 $20,74,047 $23,61,598
Current Liabilities
Trade and other payables $10,525 $73,892 $84,417
Contract liabilities $9,105 $9,105
Other liabilities $27,533 $27,533
Current tax liabilities $- $2,773 $2,773
Lease liability $25,521 $69,435 $94,956
Provisions $5,804 $1,20,581 $1,26,385
Total Current Liabilities $69,383 $2,75,786 $3,45,169
Non-Current Liabilities
Borrowings $2,95,139 $2,95,139
Other Payables $657 $657
Lease liability $1,09,718 $6,11,815 $7,21,533
Provisions $691 $16,153 $16,844
Total Non-Current Liabilities $1,10,409 $9,23,764 $10,34,173
TOTAL LIABILITIES $1,79,792 $11,99,550 $13,79,342
NET ASSETS $1,07,759 $8,74,497 $9,82,256
Equity
Issued capital $87,153 $12,09,227 $12,96,380
Reserves $13,149 $22,905 $36,054
Retained earnings $7,457 -$3,57,635 -$3,50,178
Total Equity $1,07,759 $8,74,497 $9,82,256
From the above information it can be interpreted that from the financial position
statement presented above it can be specified that overall performance as per total of shown
figure is favourable. From the individual comparison of performance of the company it can be
said that there both the firm performance is not effective which requires support to boost its
growth and development. From the assessment it can be articulated that timely merger can be

beneficial for the company to pay attention n on conducting timely merger in order to have
various competitive advantages. On the basis of formulated consolidated balance sheet in turn
higher ability to get larger number of resources in respect to meet both current & non current
obligation can become possible (Sethy, 2017). In addition to this, there is higher reflection of
negative figures that can impact firm in longer duration which is required to be highlighted for
underlying fact regarding timely merger.
Consolidated Annual Report - Cash flow
Baby
Bunting
G8
Education Total
2021 2020
$'000 $'000 $'000
Net cash from operating activities $36,916 $1,89,565 $2,26,481
Net cash used in investing activitites -$12,107 -$52,058 -$64,165
Net cash used in financing activities -$27,262 $1,17,529 $90,267
Cash and cash equivalents at end of the
period -$2,453 $3,16,989 $3,14,536
By analysing above presented cash flow it can be said that cash can be obtained from
operating, investing and financing activities in total is beneficial for the company. From the
assessment it can be said that there are higher number of pros that can be achieved by both
companies when proper time is analysed in order to get higher profitability and sustainability in
sector.
Articulation of the strengths and weakness with porter's five forces and Swot analysis
The SWOT analysis of the merger of the two companies is as follows,

Strengths :
Both these organizations in the year of 2021 where very sufficient of the net operating
cash will allow their business in being able to be very effective in its daily operations (Azizah
and Jannah, 2021). The gross profit of the merger of this organization is also very high which
means that its direct expenses are very efficient. The merger of these two organization is also
very effective as it has large amount of fixed assets which will help the business of the
organization in developing certain strengths.
Weakness :
The net cash for the investing activities of this merger is showing a negative balance
which shows that there are these organizations do not invest their money in efficient areas were
they can generate revenue. It can also be said that the quick ratio of this organization is very low
which shows lack of efficiency of the business (Jing and Tao, 2021). From the analysation it can
be concluded that the management of the organization operations is very weak.
Opportunities :
The main major opportunities this business has is that it has a very idea current ratio
which will allow the business in the development of a very strong and effective business (Ab-
Hamid And et.al., 2018). It cn be said that the business efficiency in the management of the
operating activities can help this organization in the management of the short term obligations.
Threats :
Major threat to this business is that it has a very low net cash flow which shows the lack
of efficiency in the management. The lack of understanding in the investment activities of this
organization be considered as the major effective ways in which the business can analyse
effectiveness of the organizational performance (Falcone and et.al., 2020.). It helps the business
in the management of the effective performance which helps the business in the management of
the organization,
Porter's Five forces will help in understanding the competitive advantage this business
has,
New Entrants :
The lack of actual efficiency of the business towards the management of its expenses
always generate a risk a new entrant to capture the market.
Existing competition :

The existing competition of this business will face tough competition from the merger of
these two organization which will help the business in the combining their resources that are
unable to perform on their own.
Powers buyers :
The power of the buyers will decreases from the merger of these two companies. The
decrease in the competition is always this beneficial.
Power of suppliers :
Merging as one organization will give this company more power to bargain with the
suppliers (Chetthamrongch, Lin and Hsiao, 2021). The power of the suppliers will be decreases
as the merger of the two companies will be more efficient in their productivity and thus, they will
have more options with different suppliers.
Threat of substitute :
The major threat of the substitute will always there however the increase in the resources
will allow the business to develop a differentiation strategy. There will always be a threat to the
substitute of the business due to which the merger will focus of creating effective strategy.
Elements of merger's value for assessing the maximum potential
The key to the achieving success as a merger is with the help certain techniques such as,
Communication :
This organization will be able to develop an effective strategy that will allow the merger
to increase the efficiency of their work will be through good communication. Strong
communication between the companies will allow the business to develop a strategical advantage
which can also be helpful for the organization in the long run. Strong relations can be developed
between the merging companies through communication. This will improve the efficiency of
their business which clearly lacking as per the financial analysis (Sun and et.al., 2019.).
Win -Win :
It is very important for the merging companies to be able to reach a conclusion that will
help the organization in the management of the analysis. In such a scenario both the parties need
to consider the other's benefit so that they can achieve success.
Shared Vision :
There is only one way in which the business can develop a target that is considered to be
very effective and essential in the management of the organization (AlAkel and Faleel, 2021.). It

can allow the business in the management of a new identity which is very effective in the
development of the organizational efficiency which will help the business in the development of
the shared value and vision of the organization.
Planning :
For the merger to be successful it is essential for the organization to plan the operations
which are related to the effectiveness of the company. It can be said that planning is very
subjective but for a merger both the companies require to participate equally. Though the ways
of communication. This participation will help them to create a strong plan for the business
(Papathanasiou and et.al.,, 2021).
Integration :
The task which will be there is the merger organization needs to be integrated properly
such that no particular company faces pressure of majority work. The perfect integration of the
work will help the business in proper quality and efficiency quantity of the products.
Effectiveness of the strong merger and acquisition allows the business in creating a new insight
which will develop the business of the organization (
Key Components of a Strong Merger &
Acquisition, 2021).
CONCLUSION
With the help of this project it can be concluded that the merger of the Baby bunting and
G8 education will be able to be very effective in their merger due to having increased resources
which can be used towards the effectiveness in the performance of their individual business. In
this project the with the help of financial ratios this organization will be able analyse the
financial performance of the merger. This project also provided the balance sheet and cash flow
for the merger of these organizations. This project provides the analysation of SWOT and
Porter's five forces for the merger. In this project the elements of merger for creation of value
from its operations are discussed.

REFERENCES
Books and Journals
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POST MERGERS AND ACQUISITIONS: CASE STUDY OF ALSALAM-BMI
MERGER. PalArch's Journal of Archaeology of Egypt/Egyptology. 18(13). pp.304-314.
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study of commercial banks. International Journal of Business Management and Finance.
1(1).
Azizah, N.L. and Jannah, N., 2021. Analisis Dampak Merger Tiga Bank Syariah BUMN
Terhadap Nasabah. MASILE. 2(2).
Chetthamrongch, P., Lin, L. and Hsiao, H.F., 2021. Change in Bank Equity Stakes before
Merger Completion: An Advance Study. Insights into Economics and Management Vol.
12. pp.164-181.
Falcone, P.M., and et.al., 2020. Towards a sustainable forest-based bioeconomy in Italy:
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Jing, W. and Tao, M., 2021. Research on clean energy development strategy of China Three
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time-varying volatility spillover approach. Finance Research Letters, p.102088.
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Online
Key Components of a Strong Merger & Acquisition, 2021[Online]. Available through:
<https://www.doidacrow.com/key-components-of-a-strong-merger-acquisition/>