Skip to content

ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Alpha plc values Beta Ltd standalone at $200m. Alpha expects synergies with a present value of $30m and will incur integration costs with a present value of $8m. Alpha offers $225m in cash. What is the net gain or loss to Alpha's shareholders?

Alpha's shareholders lose $3m. Beta is worth $200m plus $30m synergies less $8m integration costs, giving $222m, but Alpha pays $225m in cash, so the overpayment of $3m is a net loss.

  1. A$3m lossCorrect
  2. B$3m gain
  3. C$5m gain
  4. D$25m loss

Explanation

Total value gained = 200 + 30 − 8 = 222. Price paid = 225. Net = 222 − 225 = −3, a $3m loss. Ignoring integration costs would give a $5m gain, which is wrong because the costs reduce value.

Did you get it right without looking?

One question tells you little. A timed set on Acquisitions and mergers versus other growth strategies shows your real accuracy, how long you take and where you lose marks.

Practise Acquisitions and mergers versus other growth strategiesFree diagnostic mock

More Acquisitions and mergers versus other growth strategies questions