Evaluating Acquisitions

Evaluating Acquisitions

For this assignment you will evaluate one of the acquisition announcements listed below using the 3 Tests of an Acquisition. You will need to conduct research to complete all aspects of the assignment.

Instructions:

Create and upload a report of the results of your analysis, including the following:

• Date of the announcement of the deal / price / any other details
• What is the strategic intent of the acquisition (which of the 5 types of acquisition – Bower article)?  Explain your reasoning.
• At the time of the acquisition announcement, did it pass the 3 Tests of an Acquisition?  Be sure to clearly state whether it passes or fails each of the 3 tests, providing support for your conclusions.
  1. Attractiveness Test: Include Facts / Data on the target company’s industry and the target company to support your evaluation
  2. Cost of Entry Test: Compare to similar recent acquisitions in the same or similar industry
     • Use the Earnings Multiple and/or Premium over Market Value (note: the Earnings Multiple is not applicable if the target company does not have positive EBITDA)
     • Use the terms and concepts from the Eccles article as support
  3. Better Off Test: Synergy – Explain the types of synergies between the acquirer and target companies, and estimates of cost savings or value added.
     • Use terms and concepts from lecture video and the Eccles article
• Based on your analysis, is this acquisition a good strategic move for the acquiring company? Why or why not?

Choose from the following recent acquisition announcements:

• LVMH acquires Tiffany
• Amazon to acquire MGM
• Google acquires Fitbit
• Salesforce acquires Tableau
• AbbVie acquires Allergan
• Microsoft to acquire Activision Blizzard

If you have a particular interest in a different recent acquisition or acquisition announcement, you are welcome to use it for this assignment  However, be sure that both the acquiring and target firms are public companies.

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