15 Kofas firms are always looking for methods to improve efficiency and effectiveness to compete globally. Some turn to

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15 Kofas Firms Are Always Looking For Methods To Improve Efficiency And Effectiveness To Compete Globally Some Turn To 1 (52.54 KiB) Viewed 42 times

15 Kofas firms are always looking for methods to improve efficiency and effectiveness to compete globally. Some turn to mergers and acquisitions to survive. Thus, NewGold and Powell want to unite to establish Stimac Ltd. Powell's stockholders will get three NewGold shares for every Powell share they own. Other details are as follows: NewGold Ltd Powell Ltd Number of shares 50m 20m Annual earnings GH¢15m GH¢5.5m P/E ratio 5 Post-merger annual earnings of the enlarged company are expected to be eight per cent higher than the sum of the earnings of each of the companies before the merger, due to economies of scale and other benefits. The market is expected to apply a P/E ratio of 9 to Stimac Plc. Required: a) Explain to the stakeholders of both companies the justification on for the following integration strategies in mergers and acquisitions. i) Conglomerate mergers. ii) Horizontal take-over. iii) Vertical backward and forward take-overs b) Determine the extent to which the shareholders of Powell will benefit from the proposed merger.