Mergers and Acquisition Assignment
Added on 2020-05-28
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Mergers and Acquisitions Name TutorCourse Date Mergers and AcquisitionsLength of discussions between buyer and seller Noteworthy, Farmer Brothers Company made a decision to acquire the Boyd CoffeeCompany on August 22 2017 with an aim of boosting its production efficiency, expand operationand strengthen its position in the market and boost its synergies among other benefits (FarmersBros Inc.).Individually, both Farmers Brothers and Boyd Coffee company, before the mergerwhere successful and reputable companies. However, the need to boost its market presence droveFarmer Brothers to consider the acquisition with Boyd s Coffee Company based in Portland (CTPress). Notably, Boyd Coffee Company was a privately owned enterprise prior to the mergerwhereas the Farmers Bros Company was a public company before the acquisition exercise. Theannouncement to acquire the Boyd’s Coffee company asset was made in August and theagreement entered into in October 2017 (CT Press) .The duration taken in the merger andacquisition process was approximately three months. Specifically, in October 2017, the mergerand acquisition deal between Farmers Bros and Boyd Coffee Company was concluded (GlobeNewswire). Specifically, Farmer Brothers Company acquired the Boyd s coffee at $58.5 Millioninclusive of preferred stock shares (Stevens)
Mergers and Acquisition 1Describe other bidders (if any). During my research on possible investors for the Boyd’s Acquisition deal, there wasonly talk of the Farmer Brothers company as the only interested party thus there was no researchon other possible bidders for the merger and acquisition investment deal.Defensive measures employed by seller either before or after the deal announcement Typically, buyers and sellers undertake to cushion themselves against loss and fraud andseek to protect themselves against loss. Such can be said for Farmers Brothers and the BoydCoffee Company. For purposes of providing legality and authority for their transaction, BoydCoffee company contracted the services of a law firm to work out the details of the acquisitionagreement so as to protect its interests .Equally, the parties opted for a written agreement whichwas signed by representatives of the both Farmer Brothers coffee company and Boyd Coffeecompany (Law Insider).Usually, written and signed documents are considered authoritative andlegally binding which makes it easier for both contracting parties to enforce their rights under theagreement. Both contracting parties had their acquisition intentions made public which providespublic record and in another way makes the acquiring firm more valuable and raises it reputationin the market.Impact of Acquisition on Buyer Owing to its acquisition of the Boyd Coffee Company. Farmers Brothers coffee company hasexpanded its operations and distribution capacities to Initial impact of deal on buyer’s financialstatements (e.g., changes in debt/capital ratio; EPS accretion or dilution). According to themerger and acquisition deal proposed ,Farmers Brothers were to purchase the Boyd coffeecompany at $42m and also acquire 21000 worth of preferred stock .Essentially, this means
Mergers and Acquisition 2Farmers Bros had to part with the above sums of money and shares from its assets to acquire thePortland based company (Boyd).The Boyd coffee company acquisition is meant to increase andstrengthen the presence of the farmers Brothers coffee company in the region and to expand itsdistribution network.it can be said for sure that the acquisition of the Boyd company hasextended the Farmers Brothers company presence in Portland (Farmer Bros) .Through this acquisition, the Farmer Brother coffee distribution outlets and facilities havegrown which can be said to have greatly contributed to the growth of the company .Thepenetration of new market, Portland has been achieved through the successful execution of themerger and acquisition contract made between the Boyd s Coffee Company and FarmersBrothers Coffee Company. Following the merger and acquisition announcement by FarmerBrothers of Boyd Coffee, there was a slight increase in the stock values. Usually, theannouncement of mergers has this kind of effect on stocks belonging to the acquiring companies(Investopedia).The same can be said for the stock value of Farmer Brothers which shot up by 7%following the acquisition deal announcement to the press. In a way, such public announcementmake the companies seem valuable, profitable .Further the reputation of the Farmer Brothers wasboosted by the acquisition announcement.Before the merger and acquisition of the Boyd company, Farmers Brothers companyvolume of green coffee has increased by 0.9 percent as at the fourth quarter of the year2017(Global News wire). Equally, there is a substantial increase in the gross production marginby 40 percent. In addition, Farmers Bros has incurred decreased income and operations by afigure of $1.4m. Further, there’s been a decrease in the net income of the Farmers Bros Companyto $1.1. Specifically, the net sales for the Farmer Bros company has increased significantlyfollowing the merger. Currently, the net sales stood at $131,713,000 which was an increase of
Mergers and Acquisition 3$225000 from the previous quarter (Bloomberg). In addition, the Farmers Brothers company swas $1 258000 which was a reduction from $2 505000 from the previous year. This goes toshow that the merger and acquisition agreement is working in favor of Farmer Brothers coffeecompany (Bloomberg).Moreover, taxation losses decreased from $2 701000 to $ 1 688000 from the previousyear thus the assertion that the acquisition of Boyd Coffee company was good for the FarmersBrothers. Equally, net loss reduced significantly as contrasted against the year 2016(Bloomberg).There was a remarkable net loss reduction by $640000 from the year 2016 whichmeans the company made more profits than losses following the successful merger with BoydCoffee Company (Bloomberg). In a way, this shows that mergers and acquisitions can be veryeffective in achieving company goals. As per the acquisition agreement between FarmerBrothers and Boyd s Coffee, the company was to establish its presence in the region, expand itsoperations and synergies to which the same is to be accomplished under the implementation ofthe acquisition deal. Through acquisition, a company is able to grow its operations throughacquiring assets of the other company.Post-Merger Performance (From Closing to Now)How did the economy and industry perform subsequent to the subject acquisition? Partly, mergers can both be good or bad for the economy. Due to the expansion ofoperations by acquiring firms, there is the likelihood of dominance of the market or industrywhich in a way is not good for consumer welfare (Thoma). Due to the consolidation of the coffeeindustry, there’s the likelihood of consumer prices going high due to the dominance created byexpanding firm thus undermining consumer welfare.Presently,it is projected that the United
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