Acquisition Analysis Report - Finance Module, Semester 1

This report provides a detailed analysis of acquisition processes, focusing on the financial aspects of mergers and acquisitions. It begins with an overview of acquisition analysis, defining the term and its significance in business and financial accounting. The report outlines the steps involved in an acquisition, using the case of Ethan and Darren Limited as an example, including calculating the net identifiable assets, liabilities, and the gain or loss on the transaction. It further explores the reasons and benefits of acquisitions, such as expanded opportunities, increased competition, stability, market entry, product complementation, and cost savings. The report includes a table of adjustments and presents consolidated financial statements, including the statement of profit and loss and the statement of financial position, demonstrating the financial impact of the acquisition. The analysis concludes that the acquisition was beneficial for both companies, highlighting the increased profitability of the merged entity and the strategic advantages gained. The references section provides a list of academic sources used to support the analysis.

Running Head: ACQUISITION ANALYSIS 1
ACQUISITION ANALYSIS

Running Head: ACQUISITION ANALYSIS
Table of Contents
Overview.....................................................................................................................................................3
Steps............................................................................................................................................................3
Reasons or benefits.....................................................................................................................................4
Conclusion...................................................................................................................................................6
References...................................................................................................................................................7

Running Head: ACQUISITION ANALYSIS
Overview
Acquisition analysis is nothing but a term where the two companies come together mutually and
one of them takes over the other for the benefit of both of them. Acquisition Analysis is a
specialized investigation and being in the language of the business it refers to the merger or
securing of the littler organizations into less enormous ones. With regards to the perspective of
the financial accounting, consolidation means the amalgamation of the entities. Under the reason
for the tax assessment the elements are analyzed with the end goal of calculation of the amount
of the tax (Soundarya, Lavanya and Hemalatha, 2018).
Steps
There is a set patter or say number of the steps that needs to be followed in order to have the
Acquisition. The process that has been followed in case of the Ethan and Darren Limited was as
follows (Schmidt, 2015).
The first step is to find the value of the net identifiable assets as well as the liabilities of the
Darren Limited. Under this step the tangible as well as the intangible assets are measured
keeping in mind the reduction of the tax as well.
Net fair value of the identifiable
assets and liabilities of Darren Limited
Equity $ 54,000.00
Retained earnings $ 36,000.00
Asset Revaluation Surplus $ 18,000.00
$ 108,000.00
Plant $ 1,050.00
Inventory $ 1,400.00
Total $ 110,450.00
Consideration Transferred $ 110,000.00
Gain on bargain and purchase $ 450.00

Running Head: ACQUISITION ANALYSIS
This is done in order to find out the gain on bargain and purchase by calculating the difference
between the total value and the consideration given. The amount of the non-controlling asset,
goodwill and the final consideration is also calculated (McNichols and Stubben, 2015).
Reasons or benefits
Secondly there are various purposes for which the company wants to have acquisition and its
analyses so that they can grab greater opportunities and also can expand their businesses. Few of
them have been listed below.
 Due to the several expanded activities, different opportunities may arise and this may
help in assembling the central abilities of the organization. The consolidation process will
help the business grow and expand (Hsu, Wright and Zhu, 2017).
 There are several companies who decide how to converge and they come together as a
support system of each other to provide cut throat competition to the other companies.
This acquisition also increases the chances of the stability and sustainability. An
organization can deliberately wave to venture into various markets where a comparable
organization is now working as opposed to begin from point zero, thus the organization
may simply converge with the other organization (Brueller, Carmeli and Markman,
2018).
 Another reason for the acquisition is to give a proper complement to the current product
or service. When two firms get combined they can have a competitive edge over the
others (Bolbanabad, Mosadeghrad Arab and Majdzadeh, 2017).
 In case of the private companies the company requires the need of the Acquisition in case
they are unable to find someone to run the operations of the business.
 The costs can also be saved by using the same production process and the same services
to cater the larger customer’s base (Bany-Ariffin, Hisham and McGowan, 2016).
Table of Adjustments
Adjustments GROUP
Particulars
ETHA
N
DARRE
N Dr Cr
Profit before tax 120000 12500 300 450 130850
1800

Running Head: ACQUISITION ANALYSIS
Income tax expense 56000 4200 90 59570
540
Profit 64000 8300 71280
Retained Earnings 80000 36000 36000 80000
(1/7/14)
Transfer from BCVR - - 1260 1260 0
144000 44300 151280
Transfer to General
Reserve 0 3000 3000 0
Retained Earnings
(30/06/2015) 144000 41300 151280
Share capital 360000 54000 54000 360000
BCVR 2450 1050
140
1260
General Reserve 10000 3000 3000 10000
514000 98300 521280
Asset revaluation reserve
(01/07/14) 13500 18000 18000 13500
Gains 5000 2000 7000
Asset revaluation reserve
(30/06/2015) 18500 20000 20500
532500 118300 541780
Liabilities 42500 13000 90 450 55920
60
575000 131300 597700
Land 160000 20000 180000
Plant and Machinery 360000 125600 6000 479600
Accum Depreciation -110000 -33000 7500 300 -135800
Inventory 55000 18700 200 73900
Shares in Darren 110000 110000 0
Total 575000 131300 124600 124600 597700
After analyzing the above case it can be stated that in case of the Ethan and Darren limited even
after giving the consideration worth $110000, the company yet experienced the gain on the
bargain and the purchase. Secondly the overall profit of the merged company increased and

Running Head: ACQUISITION ANALYSIS
lastly the combine’s statement of the financial position delivers more strong position in
comparison to before acquisition (Ahmed, Manwani and Ahmed, 2018).
Consolidated Statement of the Profit and loss and other Comprehensive income
For the year ended 30th June 2015
Profit before tax 130850
Income tax Expense 59570
Profit for period 71280
Other Comprehensive income
Gain on revaluation of
assets 7000
Comprehensive income 78280
ETHAN LIMITED
Consolidated Statement of Financial position
As at 30th June 2015
Current Assets 73900
Inventories
Non-Current Assets
Plant and Machinery 479600
Accumulated
Depreciation -135800 343800
Land 180000
Total Non-Current Assets 523800
Total Assets 597700
Equity
Share capital 360000
Retained Earnings 151280
General Reserve 10000
Asset revaluation Surplus 20500
Total Equity 541780
Liabilities 55920
Total Equity and Liabilities 597700
Conclusion
From the above analysis it can also be stated that it is a win-win situation for both of the
companies as the shareholders of the Darren Limited have received consideration as well as the

Running Head: ACQUISITION ANALYSIS
new outlook to the merged company and the benefit for the Ethan Limited is that it got the
customers of the Darren Limited to serve to.

Running Head: ACQUISITION ANALYSIS
References
Ahmed, F., Manwani, A. and Ahmed, S., 2018. Merger & acquisition strategy for growth,
improved performance and survival in the financial sector. Jurnal Perspektif Pembiayaan Dan
Pembangunan Daerah, 5(4), pp.196-214.
Bany-Ariffin, A.N., Hisham, M. and McGowan, C.B., 2016. Macroeconomic factors and firm’s
cross-border merger and acquisitions. Journal of Economics and Finance, 40(2), pp.277-298.
Bolbanabad, A.M., Mosadeghrad, A.M., Arab, M. and Majdzadeh, R., 2017. Impact of Merger
and Acquisition on University Performance. Archives of Iranian medicine, 20(8), p.0.
Brueller, N.N., Carmeli, A. and Markman, G.D., 2018. Linking merger and acquisition strategies
to postmerger integration: a configurational perspective of human resource management. Journal
of Management, 44(5), pp.1793-1818.
Hsu, K.C., Wright, M. and Zhu, Z., 2017. What motivates merger and acquisition activities in the
upstream oil & gas sectors in the US?. Energy economics, 65, pp.240-250.
McNichols, M.F. and Stubben, S.R., 2015. The effect of target-firm accounting quality on
valuation in acquisitions. Review of Accounting Studies, 20(1), pp.110-140.
Schmidt, B., 2015. Costs and benefits of friendly boards during mergers and
acquisitions. Journal of Financial Economics, 117(2), pp.424-447.
Soundarya, M.B., Lavanya, S.M. and Hemalatha, S., 2018. Merger and Acquisition of Business
Organization and Its Impact on Human Resources.