25735 Discussion of Acquisition Plan and Merger Strategy and ACQUISITION

Business Plan Strategy

Case Scenario/ Task

Overview of acquirers’ business and discussion of acquirer’s business plan/strategy and its merger strategy (about one page)

? The analysis should be based mainly on lecture 2 and include the following elements:

o Industry analysis: Porter’s five forces, industry trends and developments, and other industry analysis tools applied to the acquirer

? Given the page limit, only the most important/relevant factors should be highlighted

? Identify opportunities offered and threats in the industry environment

o Company analysis: Analysis of the company’s business performance, strengths and weaknesses --

this will involve both qualitative and quantitative analysis

o Combine the above two in a SWOT matrix

o Devise/analyse company strategy

o Devise/analyse company’s merger strategy: what kind of companies should the acquirer acquire based on your analysis?

? Deal Rationale (about one page)

? Justify or criticise the deal concept and explain the logic (or lack thereof) of the deal

o Using tools and concepts from lecture 1, describe the motivations and the rationale for the deal

? What are the sources of synergy? Be specific and detailed

? What are the other potential sources of value creation in this deal?

? What other objectives/reasons are behind the deal?

? Are there bad reasons for the deal?

? Was the deal reasonably priced and correctly timed?

o Try to link the deal rationale with the industry/company analyses above. How does the current deal fit with your analysis (of acquirer’s business/merger strategy) of the kind of targets the acquirer should pursue --- i.e., is this deal a good ‘strategic fit’ for the acquirer?

? Does the deal make sense in a long-term or “strategic” sense?

Discussion of Acquisition Plan and Merger Strategy

The intrepid mining company and blackthorn resource merged in 2014. The companies performed averagely before the merger, and many changes have occurred due to the merge to the stakeholders of the two. Before the merger, Intrepid was required to buy from Blackthorn Resources $110million worth of stock at $0.30 just before implementation (Andrews, 2014 p35).

The deal looked lucrative for Intrepid as the acquiring company in the merger.

The strength of the companies was going to be strengthened, being that the two operated in the same industry, however under different segments. The opportunities would then double since the operations would be wide (Pereira, 2013, p20). The personnel size had increased and operated under one Management. The competition from the other similar companies for the resource would increase, because the market size was downsized to one company (Luoma & Makikangas, 2014, p 41).

The political, economic, social, technological, environmental and legal (PESTEL) spheres of the merge would have a different reaction (Shilei & Yong, 2009, p 20100). The legal aspect would suffer constraint due changes regarding the law governing such institutions compared to the previous operation. The merger is script base due to the nature of management. Blackthorn shareholders would rapidly have an economic gain due to the script. It would stand at $0.356 per share of Blackthorn. On the other hand, intrepid has a better social exposure to the copper development project. The exposure would, in turn, provide an economic benefit to Interpid by participating in a payback of 18% to the last closing price (Andrews, 2014, p 37).

Rationality of the merger The merger between the companies has enabled them to get the Kitumba Project in Zambia, which involves mining. Zambia being expected to be among the top 5 worldwide in copper mining, is a better chance for the merger. It is evident that a larger cash position is available to

the merge because they attract many funds (Geschwind et al., 2016, p 139). In the Kitumba project, however, the merging company was required to get a license for the DFS programme. Project implementation and overhead costs were expected to be high. A stronger financial position is obtained, and the future waits for the identification of resources which can be developed together. However, was the deal as good as it looks or could there be some loopholes? There were conditions attached to this partnership which other critics have deemed not beneficial to all parties. These included regulation of the customs and approval by the courts. The intrepid shareholder would be needed to consent to the buyback. From the start of the merger, Blackthorn

seems to benefit more than Intrepid. The buyback was definite by the Intrepid, but the outcome of the same is uncertain (Giessner, 2016, p66). Whether the buyback money will be recovered regarding profit or other means by Intrepid could not be curtained. The merger is positive, it gives both companies high biding power, access to resources, additional business opportunities is an added advantage. They also benefit from an attractive location, quiet intensity of capital, stable production profile and a robust economy among others.