Cases in Finance: Analyzing Merger and Acquisition Motives (BBA 4005)

This report delves into the motives behind mergers and acquisitions, a significant aspect of business strategy. It begins with an introduction highlighting the importance of mergers and acquisitions in the global business landscape and outlines the driving forces behind these strategic moves. The report then explores various motives, including growth, diversification, risk reduction, and financial performance, providing a comprehensive understanding of the rationale behind mergers and acquisitions. The core of the report analyzes two recent mergers: the merger of Powernet IT Solutions with Evolve IT Australia and the merger of TPG and Vodafone Australia. For each case, the report identifies and discusses the principal motives, such as growth aspirations, strategic planning, market expansion, and cost efficiencies. The report concludes by summarizing the key benefits of mergers and acquisitions and emphasizing their impact on market standing and shareholder wealth. The report is well-structured, with indexed headings, subheadings, a front cover, a table of contents, a main body, and a references section, adhering to the assignment guidelines.

Running head: CASES IN FINANCE
Cases in Finance
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction:...............................................................................................................................2
Merger and acquisition motives:................................................................................................2
Two recent mergers and their motives:......................................................................................3
Conclusion:................................................................................................................................4
References:.................................................................................................................................6

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Introduction:
Internationally, mergers and acquisition has occupied a higher principal in the
business approach because of its apparent paybacks. A merger is believed to have happened
when two businesses generally organizations is combined to turn into a new firm. There is
always a driving force which has the solid wish for mergers and acquisitions. These are
normally recognized as the reasons in merger and acquisitions works (Green 2016).
Regularly, the motivating force mentioned is the collaboration understanding while the others
consist of the new marketplace access, transmission of knowledge and administrative
learning. The primary purpose of this study is to understand the two recent merger decision
taken by Powernet and Evolve IT, TPP and Vodafone Australia.
Merger and acquisition motives:
Growth is regarded necessary for survival of the company. Companies that are
merging can achieve growth with the help of two means namely the organic and inorganic
means. Mergers or acquisitions are regarded as the instances of attaining the inorganic
development. Apart from the other things, mergers come with the admission to amenities
trademarks, brands, technology and personnel.
Apart from the growth, diversification is another motive of mergers. Diversifications
in mergers and acquisitions is regarded as more noticeable in multinational mergers where
the eggs of the company are kept in different basket rather than keeping it in one areas of
goods and service. As stated by Nelson (2018) the likelihood of commercial failure of the two
individual companies is higher than in case of the multinational merger of two. The main
motive of divergence is to facilitate essential organization, marketing expertise and
technicality that would lead to rise in the market share. Every type of mergers provides
certain kind of risk reduction. Vertical integration helps in reducing risks by implementing

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control on the production procedure. While horizontal mergers help in lowering the
competitors and uncertainties as well. It is well-established that conglomerate mergers are
commonly carried out based on the interest of the administrators because shareholders can
specialize their portfolios alone.
As a measure of financial performance mergers results in free cash flow. Free cash
flow amounts to cash which the business is able to harvest following the laying out of cash
that is required to preserve or enlarge the base of its asset. Free cash flow is considered vital
for the reason that it permits a company to follow openings which helps in improving the
value of shareholder. This can be computed by taking into the account the operating cash
flow and deducting the capital expenses. As pointed out by Lebedev (2015) managers
regularly make use of sufficient free cash flow so that it can enter in the merger and
acquisition because they see mergers and acquisitions as highly advantageous and lucrative
the other types of investments.
Two recent mergers and their motives:
There wasn’t any kind of end in sight of consolidation in the last few years with some
of the biggest Australian companies operating in the ICT have been involved in mergers and
acquisitions Howson (2017). Companies such as TPG and Vodafone Australia has announced
that it would merge. This has ultimately flipped the telco industry on its head.
The Sydney based managed service provider Powernet IT solutions has now merged
with the Evolve IT Australia that has its base in Victoria. The companies in its press
conference has revealed that the business would combine to form a managed service
powerhouse that has a combined 50 years of experience Deng and Yang (2015). As the part
of continuous strategic planning, the main motive of merging with the Evolve IT is that it is
planning to grow through mergers and acquisitions. Powernet IT solutions has greater culture

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alignment with Evolve IT and has lot in common, including the aspirations of growth. On the
basis of strong growth aspiration Powernet IT has decided to merge with Evolve IT as this
will help in brining both the teams together and accelerate its mutual growth.
Both the companies are aiming or a higher term of growth and expansion, by
obtaining a lofty which is organically very tough (Dhaliwal et al. 2016). By knowing that the
company as value and same things at the same time makes decision very simple.
The company that has the combined key relationships with vendors such as Microsoft,
Datto and Sophos would mainly remain focussed on the important industries of transport,
not-for-profit, charity, wellness and retail (Hassan, Ghauri and Mayrhofer 2018). As
integration is about to take place in the next six months, Evolve IT following the merger with
Powernet is anticipated to expand its operations additionally during that time.
Apart from this, the Australian carriers namely the Vodafone Hutchison Australia Pty
Ltd N the TPG have come to an agreement of merging as Vodafone Group Plc (Florio,
Ferraris and Vandone 2018). As the part of the business deal, Vodafonen Group and
Hutchison Telecommunications Australia Ltd would each hold the ownership of 25.05
economic interest whereas the remaining shares of 49.9% would stay with the TPG.
The main motive of merging the business is that it aims to explore the exploratory
discussions relating to the possible merger. As both the companies are big in size, power and
global footprints of Vodafone being the parent company such kind of move is very much
within the grasp. The merger would allow the company to form a very formidable third
competitor (Boateng, Lordofos and Glaister 2016). The decision of merging with Vodafone
Australia would result in efficient cost structure and capacity to compete.

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Conclusion:
As evident from the discussion given above, it is evident that collaboration,
development, improving the market standing and forming wealth for the stockholders stands
out for administrators. Mergers may allow the companies to cross-subsidize the products,
concurrently limiting the competition in greater than one market and deter the probable
competitors from entering in the market. The main benefits of merger are efficiencies of
scale, improvement in financial position, increased revenue base, growth in market size and
obtaining critical technological and human skill. In some of the cases, mergers provide an
opportunity to rationalise the service offerings close down the lower demand service and
remove the operational efficiencies.

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References:
Boateng, A., Lordofos, G. and Glaister, K.W., 2016. Motives for European mergers and
acquisitions. Mergers and Acquisitions in Practice, 5.
Deng, P. and Yang, M., 2015. Cross-border mergers and acquisitions by emerging market
firms: A comparative investigation. International Business Review, 24(1), pp.157-172.
Dhaliwal, D.S., Lamoreaux, P.T., Litov, L.P. and Neyland, J.B., 2016. Shared auditors in
mergers and acquisitions. Journal of Accounting and Economics, 61(1), pp.49-76.
Florio, M., Ferraris, M. and Vandone, D., 2018. Motives of mergers and acquisitions by state-
owned enterprises. International Journal of Public Sector Management.
Green, M.B., 2016. Mergers and acquisitions. International Encyclopedia of Geography:
People, the Earth, Environment and Technology, pp.1-9.
Hassan, I., Ghauri, P.N. and Mayrhofer, U., 2018. Merger and acquisition motives and
outcome assessment. Thunderbird International Business Review, 60(4), pp.709-718.
Howson, P., 2017. Due diligence: The critical stage in mergers and acquisitions. Routledge.
Lebedev, S., Peng, M.W., Xie, E. and Stevens, C.E., 2015. Mergers and acquisitions in and
out of emerging economies. Journal of World Business, 50(4), pp.651-662.
Nelson, T., 2018. Mergers and Acquisitions from A to Z. Amacom.