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4 pages/β‰ˆ1100 words
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
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Topic:

Business Acquisition Accounting, Finance, SPSS Research Paper

Research Paper Instructions:

Business Acquisitions
Preparation
Use the Internet to research two publicly traded U.S. companies and download their financial statements.
Assume that you are the CEO of one of the selected companies. You are responsible for gaining control over the other company.
You have three choices, any of which you believe that the board of directors will support:
Choice 1: Your company acquires 35 percent of the voting stock of the target company.
Choice 2: Your company acquires 51 percent of the voting stock of the target company.
Choice 3: Your company acquires 100 percent of the voting stock of the target company.
Instructions
Write a paper in which you:
Provide a brief background introduction to both the company that you are working for and the company you are responsible for gaining control over.
Specify the overall manner in which the acquisition fits into your company’s strategic direction.
Identify at least three possible synergies that could occur as a result of the proposed acquisition.
Select two out of the three choices provided in the scenario and analyze the key accounting requirements for each of the two choices that you selected.
Suggest one strategy with which you would prepare the financial statements for your company after the acquisition under each of the two choices.
Select the choice that you consider to be the most advantageous to your company.
Explain to the board of directors at least three reasons why your selected choice is the most advantageous to the company.
Assume that two years after the acquisition, your board of directors wants to offer the shares back to the public in hopes of making a large profit.
Assume that in each of the two years your company and the target company have had the same reported net income as they did in the year of acquisition.
Determine the type of value (that is, cost of fair value) that you would use to report the subsidiary’s net asset in the subsidiary’s financial statements, which the company will distribute to the public with the public offering.

Research Paper Sample Content Preview:

Business Acquisition
Student’s Name
Institutional Affiliation
Business Acquisition
Tesla and Vale
Lately, the case for climate change has gained significant attention with technological innovations spearheading efforts towards reducing greenhouses and more importantly, a better ecology. Currently, electric vehicles (EVs) appear to have fashioned a clear for other innovative ideas to spring. In this regard, Tesla has gained much popularity that has traversed national boundaries. Tesla is renowned for the primary task of supplying the world with exceptional EVs, which are not only well designed, but also have magnificent design. This niche is quite new and the meteoric rise of a company that was founded in 2003 has been astonishing.
Recently, it became the most valued automobile company with respect to market capitalization surpassing conventional stakeholders such as Ford and General Motors (Malara & Randewich, 2019). The company’s explosion in value is highly correlated to the gargantuan factories that it has built in major continents including Europe and Asia. These ‘gigafactories’ have created a more vertical integration that enables Tesla to produce quicker and efficiently (Gorzelany, 2014). Other products from the ‘gigafactories’ include home storage solutions, solar panels, and batteries. In this case, Tesla is seeking to acquire a controlling stake of 51% at Vale Mining Company. Vale is a mineral exploration company that focuses on nickel production.
Vale SA aligns with Tesla’s goals because of the shifting role of lithium for nickel in the foreseeable future. Many people are oblivious that 61% of the resulting EV battery is nickel. Elon Musk has come to the fore to talk about this issue. The Tesla CEO asserts that Nickel-based cells give customers longer range and higher energy density. Further, he has requested companies in this niche to enhance their efficiency and productivity levels. Retrospectively, the company would offer them great contracts for the delivery the nickel-based cells to the ‘gigafactories’ if are produced in an environment-friendly manner. Vale is in great position to harness the ensuing economic opportunities considering that even the conventional firms such as Nissan and Ford are committing significant amounts to the production of EVs and related research and development expenditure. It would be exciting to see the growth of the company’s interest in related activities. In this case, the company’s ability to produce nickel-based cells would come in handy to Tesla considering that cobalt was being edged out gradually.
A couple of possible synergies are possible when it comes to the success of the proposed acquisition. First and foremost, there are clear revenue synergies that would accrue to both companies considering that Tesla is a significant customer to Vale alone. Tesla delivered almost half a million (499,550) EVs across 2020 (Boudette, 2021), which is a very small figure compared to its capabilities once the ‘gigafactories’ are completed. Secondly, there is cost synergies where the company being acquired gets to enjoy the resources of its parent company and thus, reduces inefficiency among employe...
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