Financial Management and M&A

This assignment delves into the complexities of international and financial management within the context of mergers and acquisitions (M&A). Using Banco company as a case study, it investigates the influence of cost of capital on the firm's post-acquisition performance. The analysis explores factors under the control of the acquiring company, such as capital structure policies and dividend payouts, alongside external influences like interest rates and tax policies. Ultimately, the report aims to shed light on the critical considerations for effective financial management during M&A transactions.

INTERNATIONAL
FINANCE AND FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Evaluation success or failure of merger and acquisition........................................................1
TASK 2............................................................................................................................................3
Evaluation of acquisition decision done to buy Banco popular.............................................3
Task 3...............................................................................................................................................4
Impacts of cost of capital........................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Merger and Acquisitions is one of the most important corporate restructuring tool which can
be used by an organisation for gaining the sustainability. Although, this can be said that the
company needs to make these tools so that they can rearrange their structure effectively.
although, under this report, this can be said that the M&A are currently in the company in order
to assume to organisations are successful (Madura, 2011).
TASK 1
Evaluation success or failure of merger and acquisition
Mergers and Acquisitions have attained vast priorities in the current decades as this becomes
the major tool which ultimately help out to make certain tool from multitude of theoretical
frameworks. Research on the mergers is mostly an interdisciplinary field, and the research on the
subject is highly extensive in nature. now, this becomes the trend of corporate restructuring tool
as this will help out to make them effective and efficient so that the company would gain the
sustainability. But, selecting diverse mergers along with two diverse results, there is a need to
compare motives, contexts, strategies and other components covered. M&A needs to make
certain things which would ultimately assist the firm for making the business objectives which
will ultimately synergies the operations, growth. Although, this perspective assess how the
business company become relies on both of their own resources and assets, and firm’s
environment under which they operate.
As per Askari and Askari, (2012) this is rightly observed that the M&A activity becomes
popular form of Corporate development in order to form development and diversity. M&A is the
most effective management restructuring strategy which strengthen the economy widely under
which organisation can render to their investors and stakeholders. M&A assist the effective
organisations to develop in a faster pace than their contenders, and ensure that the unhealthy in
term of finance, are acquired. The pace of M&A picked up earlier 2000, and in 2004, M&A
reach to the 30000 acquisitions throughout the planet. However, this can be said that M&A
activity throughout the industries which are emerging very fast, like health care, information
related technology, educational related infrastructure and the software emergence, along with the
traditional industries like production, products and food services. Enhancement in the M&A
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activity provides rise in the development of academic research on this topic, and mostly
emerging nature of M&A which likewise needs consistent enhancing of the firm’s approach.
Under this assignment, explanations, elaborations on the diverse kinds of mergers and merger
motives, and framework on how to assess merger effectively and failure. Firstly, this can be said
that mergers help the organisation for expansion and growth. External expansion, by acquiring
an organisation in geographically so that the organisation attained the firm in a fast and effective
manner. An expansion might render specific synergy advantages which ultimately assist the
organisation for making the business advantage on order to attain the pre-set targets (Brigham
and Houston, 2012).
The main advantages of the M&A are the synergy which ultimately assist the firm for
gaining the competitive advantage over the competitors. Financial issues which are also crucial
while knowing the motives for merging. Although, value for acquiring the organisation might
have enhanced in the market value while merging with the targeted company. This is the main
tool which ultimately assist the firm for making the business objectives effective and efficient.
Although, this can be said that M&A are the main drivers which is consistently on the trend
throughout the industry. These kinds of main trends influence question of internal or external
development. The key basis of the synergy is a kind of part under which whole value would get
more than their individual sums. For example, this can be said that 2+2=5. There are basically
two kinds of synergy which emerge in two forms; revenue increments and the cost limiting. In
operating synergy, revenue increment synergy is the most important synergies which would be
highly difficult to attain than the cost limiting synergies.
As per Chandra, (2011) this can be said that success and failure of M&A are managed by the
company in order to make certain tools. By adopting merger which ultimately did not completed,
will automatically goes down. While on the other way, this can be said that this is crucial subject
under which the success case selected in the thesis which could be labelled as the success. While
evaluating the success or failure of a merger procedure this is crucial to think at the reasons,
strategies and objectives in the pre-merger planning and compare this with emergence after the
merger date. As per the earlier research, Failure covers deficiency of appropriate planning,
deficiency of looking at the potential post-merger integration issues, and estimating synergies
which comes to be the illusory. Every coin has two sides, similarly there is success and failure of
merger and acquisition process. Hence, it becomes important to evaluate attached downfalls and
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gains. In order to analyse the process of merger it is required to find out underlining objectives,
targets of this procedure. It is essential to measure the final results or outcomes to come into
decisions that whether the process conducted is useful or not. It is noted that failures of this
process can be regarded as lack of proper planning, finding out obstacles that may arise after the
process is conducted. There can be situation that hurdles may arise at initial point of M&A
process. It may cause huge financial loss for the parent company. Success and failures is largely
dependent on the type of company which is acquiring other company, as all assets and liabilities
are framed with new adopted system. Failures of this procedure can be caused due to number of
factors if is not adopted in proper and appropriate manner.
For instance, problem can be arising during Pre M&A step company have to pay huge
amount of finance for acquiring second firm or organisation. On the other hand, during Post step
of M&A process the hurdles can be lifted in integrating process. Therefore, all these failures
need to be properly examined before conducting this process. It lies into hands of top level of
management as they are responsible for making such kind of strategic decisions. Human resource
department of any business firm play essential role in M&A concept. It should not be considered
that only financial state, management structure of the organisations gets framed but also the HR
department is also initiated with new procedure (Aebi, Sabato and Schmid, 2012).
It is identified that initial phase of M&A process is crucial stage, it should be properly
formulated otherwise company have to bear its impact in future times. Moreover, it is required to
have broad and transparent view point before combining any company. Basically, there are two
types of organisations that are involved under this process, first is known as acquiring firm other
one is acquired company. There may be cases that manager of acquiring company has to modify
their rules, procedures in accordance to dominance of leaders of large company. As it is possible
that management of larger company possess high power on small organisation which is acquired.
The result of this process, helps in expansion of business.
TASK 2
Evaluation of acquisition decision done to buy Banco popular
Acquisition is a corporate business activity under which a firm use to buy maximum, if not
all target company's ownership stakes in respect to take control of that particular firm business
operations. It is essential to make use of acquisitions to redirect corporate planning that has never
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been at greater. Plenty of managers in present time used in relation to buy a company access to
market products, technologies, resources and other aspects. By the help of this they can gain
maximum advantages of increasing same point of objectives by its internal efforts. Apart from
this, it has been seen maximum acquisitions at wider scale. Plenty of studies indicate that such
kind of deals cannot live up to their expected future expectations. Some managers give more
stress one various aspects those are sufficiently helpful in collecting more effective outcomes in
coming times (Wojcik, 2018).
The managers act as an effective persons or adviser to the employees of an
organization's along with the administration those are interested to come into merger and
acquisitions deal. The waves of this particular agreement that enable businesses to attain
importance of gaining competitive benefits in the market. Henceforth, making M&A one of the
fastest tactical aspects for international parties as well as for those who are coming with their
start-up businesses. Managers plays an eminent role in the process of M&A among two
companies. It is considered to be one of the essential part of growth strategies that are carried out
for a positive reason (Moutinho, 2011).
The reality is that in spite being risk involve in acquiring a new venture of a
business is an attractive route to growth. Once merger and acquisition has announced it will carry
plenty of queries from employees of both organizations. Job security, relocation, brand new
reporting system as well as changes benefits. These all create uncertainty for the managers.
Task 3
Impacts of cost of capital
Cost of capital is the main thing which comprises debt of equity in assets, capital structure
normally demonstrates the firm’s financing strategy. In fact, capital structure is based on the
balancing the cost and advantages of funding, and likewise influenced by the asymmetric
information, market timing and one’s long term strategy. There are various factors that are
making huge impacts on the cost of capital that the company has specific control over a period of
time. Some of them are:
 Capital structure policies: It has been discussed that in any business deal which
firm has certain control over its total cost of capital structure (What is Cost of
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Capital, 2018). with the increase in maximum debt the cost to company can also get
enhanced.
Dividend policy: It has been analysed that during the time of acquisition firms has control over
its pay-out ratios. With any modification in these ratios can increase the breakeven point among
lower cost equity to the company (Brealey and et. al., 2012).
There are some other factors that are not under the control of a company. Those are mention
underneath:
 Rate of interest: It will affect the cost of debt and potentially equity portion of the
company. By increase in rate of interest debt of company will also increase at the
same point of time.
 Tax rates: It do affect the after tax cost liabilities. As tax rate enhance, the cost of
debt decrease and at the same time cost of capital would also become low.
CONCLUSION
From the above project report, it has been concluded that international and financial
management is an essential aspect that are needs to take into consideration while conducting
any business deal such as merger and acquisition. All those related aspects that are been
faced by Banco company after acquisition are requires to be followed clearly. This report
analyzes various impacts that are associated with cost of capital are discuss more effectively.
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REFERENCES
Books and journals:
Madura, J., 2011. International financial management. Cengage Learning.
Askari, H. and Askari, H., 2012. Risk sharing in finance: The Islamic finance alternative. John
Wiley & Sons (Asia) Pte. Limited.
Brigham, E. F. and Houston, J. F., 2012. Fundamentals of financial management. Cengage
Learning.
Chandra, P., 2011. Financial management. Tata McGraw-Hill Education.
Aebi, V., Sabato, G. and Schmid, M., 2012. Risk management, corporate governance, and bank
performance in the financial crisis. Journal of Banking & Finance. 36(12). pp.3213-3226.
Wojcik, D., 2018. The New Oxford Handbook of Economic Geography. Oxford University Press.
Brealey, R. A. and et. al., 2012. Principles of corporate finance. Tata McGraw-Hill Education.
Moutinho, L. ed., 2011. Strategic management in tourism. Cabi.
Online
What is Cost of Capital. 2018.[Online]. Available through: <
https://corporatefinanceinstitute.com/resources/knowledge/finance/cost-of-capital/>.
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