Critically analyse the benefits and risks of a acquisition

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Reference no: EM133200405 , Length: word count:4000

Question 1: Union UK Ltd ("Union") is a UK-based manufacturer of various types of vehicles, mainly saloon cars, SUVs, estate cars and small-medium size vans. Its sales cover the UK, most of the EU and certain countries in North Africa. Its distribution system relies exclusively on 3rd party distributors.

It wishes to expand in to Asia and after several months' research it identifies a Hong Kong-based car manufacturer, HK Carz (HK), a private limited company whose market offerings appear complementary to, but not the same as its own. HK has significant distribution capabilities in several Asian countries via both its wholly-owned distributors and third party distributors. It produces mainly 4x4 and high performance sports cars.

Union is in advanced negotiations to purchase 100% of HK from its owners, Finbar Investments, a private equity investment firm based in China, via a share purchase scheme. Finbar is willing to sell 100% of its shares, but has also expressed a willingness to discuss a 50/50% Joint Venture with Union.

Union sees benefits from the acquisition such as :-

1. Utilisation of HK's own distribution outlets (i.e. those owned by HK) as well as gaining access to HK's third party distributors.

2. Utilisation of spare manufacturing capacity to manufacture HK vehicles in the UK and vice versa.

3. Exploring the feasibility of an online joint sales platform in both continents alongside their existing distribution channels.

4. Sharing technical understanding between the companies regarding their vehicle system designs, to ensure compliance with safety legislation in their respective territories.

5. The development of a powerful joint Purchasing Department

Question 1. Critically analyse the benefits and risks of a 100% acquisition versus a 50/50% Joint Venture and identify your chosen way forward based on that analysis. This analysis should as a minimum consider the following issues: - financial, reputational, branding, risk of unfriendly takeover, loss of IP, law and jurisdiction.

Question 2. On the assumption of a 100% acquisition, identify the main steps in the acquisition process. In addition, critically identify the three most significant legal or commercial risks with your proposed course of action from Question 1 (including assessing why those identified risks pose the most important risks to the acquisition and then providing a critical assessment of how those three main risks can be mitigated).

Question 3. Identify how you would go about setting up the new joint Purchasing Department. Critically consider:-
a. Which Corporate identity would be used?
b. How would you maximise the power of the joint organisation? e.g. Use common parts in Union and HK vehicles to maximise commercial leverage and minimise cost.
c. Identify clause headings to be included in a new set of Corporate Terms and Conditions to be used with all suppliers e.g. Delivery

Reference no: EM133200405

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