| Instead of
selling your company, you may in fact be interested
in acquiring another company. In some cases, the
market value of a company is cheaper than the replacement
costs of its assets. This may make expansion less
costly. Nevertheless, there may be other reasons
for acquiring another firm. Amerigo can help.
Economists classify acquisitions into four groups:
horizontal, vertical, congeneric, and conglomerate.
A horizontal acquisition occurs when one firm
combines with another in its same line of business,
for example, when one widget manufacturer acquires
another. An example of a vertical acquisition
is a steel producer's acquisition of one of it's
own suppliers such as an iron or coal mining firm.
Congeneric means "allied in nature or action",
hence, a congeneric acquisition involves related
enterprises but not producers of the same product
(horizontal) or firms in a producer-supplier relationship
(vertical). A conglomerate acquisition occurs
when unrelated enterprises combine.
In theory, acquisition analysis can be simple,
but it can also be very complex. The acquiring
firm should perform a capital budgeting analysis
to determine whether the present value of the
cash flows expected to result from the combination
exceeds the purchase price that must be paid for
the targeted firm. If the net present value is
positive, the acquiring firm should take steps
to acquire the targeted firm. The targeted company's
stockholders, on the other hand, should accept
the proposal if the offering price exceeds the
present value of the expected future cash flows
that would result if it continued to operate independently.
Theory aside, however, some difficult issues are
also involved:
- The acquiring company must estimate the cash
flows that will result from the acquisition;
- It must also determine what effect, if any,
the new combination will have on its own required
rate of return on equity;
- it must decide how to pay for the merger
- with cash, its own stock, or some other type
of package of
securities; and
- having estimated the benefits of the acquisition,
the acquiring and target firms must bargain
over how to share or distribute the benefits.
Amerigo
Corporate Finance Partners, LLC can help
you work through these issues and provide the necessary
third party negotiations to properly structure your
acquisition transaction and insure the interests
of your company and your stockholders. Additionally,
Amerigo Corporate works with Amerigo
Ventures, LLC and other capital market sources
to identify potential funding for the acquisition.
BUSINESS PLANS OR EXECUTIVE SUMMARIES
We are always looking for new investment
prospects. If you feel you have an opportunity
that would fit with Amerigo´s approach
and strategy, please submit a business plan
or executive summary to the below address or
electronically to:
BusinessPlans@AmerigoPartners.com
Amerigo Corporate Finance Partners,
LLC
20501 Ventura Blvd. Suite
270
Woodland Hills, CA 91364 |
