BBA 4005 Cases in Finance: Merger and Acquisition Analysis

This report delves into the intricacies of mergers and acquisitions (M&A), exploring the underlying motives that drive these significant business decisions. The report begins by defining M&A and distinguishing between mergers and acquisitions, setting the stage for an in-depth analysis of the key motivations behind these strategic moves. These motives include achieving synergies through consolidation, diversifying business operations to mitigate risks, accelerating growth, increasing market power, acquiring assets at bargain prices, and enhancing external financial ability. The report then examines two recent M&A cases in Australia: the acquisition of a stake in Adelaide Brighton Ltd by Barro Group Pty Limited, and the merger between Powernet IT Solutions and Evolve IT Australia. For each case, the report analyzes the principal motives behind the merger, such as increasing market share, achieving synergies, and strengthening business capabilities. The report concludes by summarizing the various motives for M&A and highlighting the key factors influencing these decisions, such as market conditions and financial objectives.

Running head: CASES IN FINANCE
Cases in Finance
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction................................................................................................................................2
Motives of Merger and Acquisition...........................................................................................2
Two Recent Mergers and Their Motives...................................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................6

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Introduction
Merger and acquisitions are considered as the process of consolidation of the business
organizations. When distinguishing these two terms, merger refers to the combination of two
firms and the occurrence of acquisition can be seen when one company takes over another
company (Greve and Man Zhang 2017). This report is grounded on different facets of merger
and acquisition. This report is divided into two key parts. The first part focuses on discussing
the main motives behind merger and acquisition. The second part focuses on discussion two
instances of merger and acquisition in Australia for analysing their motives.
Motives of Merger and Acquisition
There are certain motives which work behind the decision of merger and acquisition
and these are discusses below:
Synergies through Consolidation – Gaining synergies is a key motive for merger and
acquisition. The occurrence of merger and acquisition creates a situation where the
combination of two companies creates more value as compared to the total of the separate
firms. This provides the companies with the benefits other than economies of scale and
operating economies is a key type of benefit. Other benefits includes the development of
synergies from improved managerial abilities, innovativeness, creativity, increased horizon of
opportunities and enhanced ability to cover research and development because of
complementarily of resources (Hassan, Ghauri and Mayrhofer 2018).
Diversification – Reduction of risk with the help of diversification is another common
motive of merger and acquisition. Correlation of the earnings of the merging firms decides
the level to which there will be reduction in risk. Negative correlation contributes to the
reduction of more risks and positive correlation leads to lesser reduction of risks. This also

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includes the motives of the companies to diversify new areas along with new products
through merger and acquisition (Greve and Man Zhang 2017).
Growth Acceleration – Accelerating growth of business is another major motive of merger
and acquisition. Firms have the option to expand its business both internally and externally.
In case a firm lacks the required physical and managerial resources, it has the option to
ensure growth externally through merging its operations with other firms through merger and
acquisition. This technique plays a vital part in accelerating the speed of the growth of a
company in a suitable and reasonable way (Green 2016).
Increase in Market Power – The merged firm can increase its market share through going
into a merger and acquisition deal and this works a key motive for merger and acquisition.
Increase in market share enhance the proportion of profit in the firms because of economies
of scale. This also improves the ability of the merged companies to involve in bargain with its
buyers, labours and suppliers. Merger and acquisition also creates scope for the merged firm
to achieve technological innovations against uselessness and price competition. Therefore,
the merger firms can ear super normal profits through the elimination of competition through
merger and acquisition (Hassan, Ghauri and Mayrhofer 2018).
Asset Purchase in Bargain Price – Merger and acquisition can be considered as the
opportunity of acquiring assets such as rights, lands, plant and equipment and others at lower
cost than the cost that would be incurred in case the company purchased or built at present
market price. Therefore, buying assets through braining and lower price is a major motivation
of merger and acquisition (Hassan, Ghauri and Mayrhofer 2018).
Increase in External Financial Ability – The occurrence of many merger and acquisitions
can be seen when the acquired company is facing major difficulty in financing its business
operations. This is a common situation for the small growing businesses having expansion in

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financial requirements. Therefore, one major motive of merger and acquisition for these
companies is to get access to the required sources of finances to continue its business
operations and business expansions. Merger and acquisition is the only alternative for these
types of small business organizations (Rabier 2017).
Two Recent Mergers and Their Motives
1. Acquisition of 43% Interest in Adelaide Brighton Ltd by Barro Group Pty Limited
43% stake of Adelaide Brighton is acquired by Barro Group Pty Limited and its
related entities through a sequence of share purchases (accc.gov.au 2020). Since both the
companies operate in the same industry, this needs to be considered as a horizontal merger.
Therefore, the main motive of both the companies behind this merger is to increase the
market share through combining along with the generation of synergies (afr.com 2020). In
addition, reduction in the overall competition is another major motive of this merger.
Moreover, Adelaide Brighton has been going through weak trading condition in the recent
years which is a main reason for this merger. It implies that increase in the external financial
ability of Adelaide Brighton is another crucial motive behind the occurrence of this merger
(theaustralian.com.au 2020).
2. Merger between Powernet IT Solutions and Evolve IT Australia
Multi-award winning Australian IT companies that are Powernet IT Solutions and
Evolve IT Australia have the take the decision to merge with the prime motive to expand
business capabilities (power-net.com.au 2020). Another key motive of this merger is to
increase footprint in Asia Pacific region by these two companies. The merger of these two
companies will contribute to the development of multi-national SMB and mid-market service
provider (power-net.com.au 2020). This is also an example of a horizontal merger where one
key motive of both of these companies is to achieve synergy through merger. At the same

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time, another key motive of this merger is to further strengthen their business capabilities as
well as service offerings for helping the customers to achieve more (power-net.com.au 2020).
Conclusion
The above analysis shows that there are different motives of merger and acquisition
that work for the companies. Merger and acquisition helps in developing synergies where the
value of the consolidated entity increases as compared to previous situation; this ensures
acceleration in growth while ensuring product and services diversification. This also
improves overall financial capabilities of the businesses. The above discussion also assesses
two recent mergers occurred in Australia for evaluating their motives. In both of the cases,
the main motives are the increase in market share with the aim to increase the overall market
value.

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References
Australian Competition and Consumer Commission. 2019. Completed acquisition of a 43%
interest in Adelaide Brighton Ltd by Barro Group Pty Limited and/or its related entities.
[online] Available at: https://www.accc.gov.au/public-registers/mergers-registers/public-
informal-merger-reviews/completed-acquisition-of-a-43-interest-in-adelaide-brighton-ltd-by-
barro-group-pty-limited-and-or-its-related-entities [Accessed 5 Feb. 2020].
Australian Financial Review. 2018. Adelaide Brighton and Barro family see merger merit.
[online] Available at: https://www.afr.com/companies/infrastructure/adelaide-brighton-and-
barro-family-see-merger-merit-20180517-h1068u [Accessed 5 Feb. 2020].
Green, M.B., 2016. Mergers and acquisitions. International Encyclopedia of Geography:
People, the Earth, Environment and Technology, pp.1-9.
Greve, H.R. and Man Zhang, C., 2017. Institutional logics and power sources: Merger and
acquisition decisions. Academy of Management Journal, 60(2), pp.671-694.
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.
Lane, J. 2020. [PRESS RELEASE] Powernet IT Solutions And Evolve IT Australia Merge.
[online] Power-net.com.au. Available at: https://www.power-net.com.au/blog/press-release-
powernet-it-solutions-and-evolve-it-australia-merge [Accessed 5 Feb. 2020].
Rabier, M.R., 2017. Acquisition motives and the distribution of acquisition
performance. Strategic Management Journal, 38(13), pp.2666-2681.
Theaustralian.com.au. 2019. Adelaide Brighton mulls merger. [online] Available at:
https://www.theaustralian.com.au/business/companies/adelaide-brighton-books-big-fall-in-

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interim-profit-as-construction-crumbles/news-story/5f2be9d220c6c03941ad35b81e4a42b2
[Accessed 5 Feb. 2020].