Net Present Value, Mergers and Acquisitions Essay

One mo concludingary goal of fiscal managers is to maximize the packetholders wealth. Therefore, merger and strikement finales should be consistent with sh areholder wealth maximization, and fiscal characteristics of the targets to consider in the finis-making process. The net march pass judgment method is one of the accustomful methods that help pecuniary managers to maximize shareholders wealth. The capital budgeting decision mergers Acquisitions Net defer Value Financial managers are working for the shareholders and their main(a) goal is profit maximization in narrate to maximize the wealth of the confederation and the shareholders.The Capital budgeting decision focuses on the net deport appreciate method, the vengeance period, and the internal rate of return method. This paper has 2 parts, where the head start aspect relates to the capital budgeting decision. This paper pass on recommend if Goggle should accept a vernal foresee by using the net present honor method. Next, the paper ordain discuss Googles authorization acquisition of Groupon and if it exit hang on determine to the shareholders of both corporations. Finally, this paper will collide with a recommendation to Goggle and Groupon on the best wrangle of action for a merger or acquisition. crash I First, a monetary manger has to make optimal decisions they will benefit the accompany. A financial manger has to know how to make money and reinvigorated investments in order to raise capital and gift the money back into the company. The net present value is an important model and useful tool to use to help financial managers make informed financial decisions. For instance, the net present value concept full treatment with the capital budgeting decision to make an informed decision on a project and the potential for profits.In addition, net present value compares the value of a sawbuck today to the value of that same clam mark in the future, taking inflation and return s into account because dollar today is worth more than than than a dollar in the future. The time value of money concept examines into considerations that money has a different buying index number in the future because of inflation and changes in absorb rates. For example, if the net present value of a project is positive, indeed the company should accept the project, tho if the net present value of the project is negative then the company should not accept the project.Calculations 1) Calculate present value (PV) of gold inflow (CF) Initial funds Outflow PV of CF = CF1 / (1+r)1 + CF2 / (1+r)2 + CF3 / (1+r)3 + CF4 / (1+r)4 + CF5 / (1+r)5 PV of CF= $1,750,000 (1+ 2) Calculate NPV NPV = essential PV of CF Initial currency proscribedflow -Initial cash outflow + Total PV of CF r = discount rate (14%) Part II Rumors about potential mergers and acquisitions are often a hot root in the business press. Mergers and acquisitions can form advantages and disadvantages for a compa ny because it has both rewards and gambles.Companies want to have winning and profitable mergers that would have value to their shareholders. One of the close common motives for mergers is growth. There are two all-inclusive styles a firm can grow. The first base is through and through with(predicate) internal growth. This can be slowly and in in force(p) if a firm is seeking to take advantage of a window of opportunity in which it has a short-term advantage over competitors. The prompt alternative is to merge and acquire the necessary resources to achieve competitive goals ( Googles potential acquisition of Groupon would add value to the shareholders of both corporations, especially Groupon.The recent determine per share for Google is $1,130. 18 and the recent price per share for Groupon is $11. 56. The Groupon company was a impudent company that make over one billion dollars in exchange their first year in business. In 2010, when Groupon first started it was a new ide a and a new site that offered daily deals. Google wanted to buy Groupon for sixer billion dollars but the deal the daily-deals site that became the quick firm to rack up $1 billion in sales and the second-quickest, behind video hulk YouTube, to hit a $1 billion valuation.Online acquisitions didnt get any bigger than this (Sennett, 2012). The impact on Google shareholders would be a negative impact on their shoot. For example, there is as well a perception in the market that Google would not acquire Groupon as it will have a negative impact on Googles stock. This might be true for the shorter-term but not for the longer-term period as Groupon grows and delivers better carrying into action (Seeking Alpha, 2012). In addition, if Google was to acquire Groupon then Google will type tax losses.The impact on Groupon shareholders would add value to the company because Google would back it and the company could come up with more innovative ways to keep and invoke new customers. The b usiness concept for Groupon could lead to duplications by other businesses. Groupon stock would increase and the company could have made one thousand millions of dollars off a merger with Google, since Google is already a profitable company. The financial conditions of both corporations prior(prenominal) to the merger were outstanding. For example, Groupon had an annual revenue of more than $ cholecalciferol million and the company was estimated at $1.4 billion. On the other hand, Google was already a successful company with shares of over $600. Google Investors, however, seemed focused on Groupons valuation, which was estimated at 1. 4 billion during its last fund-raising round in April. Shares in Google fell 4. 5 percent, to $555. 71 the stock was battered by news that European regulators had capable an just investigation (Rusli, Worthham, 2010). Google and the Groupon Company would be more profitable if they remain separate companies because Google was already very(prenomina l) successful. For instance, Groupon business model could be easily copied.In addition, Groupon expanded to fast, and their stock sold for over $20 then dropped to $13 in less than a year. For example, the leaders at Grouon wanted to grow the company as fast as possible, and then cash out on the company. This was an outrageous offer for a company that had reported just $30 million in revenue for all of 2009, and any indifferent startup would have taken it. But Groupons growth in 2010 was off the charts, and bankers from Morgan Stanley and Goldman Sachs were salivating at the hazard of leading its public offering.Goldman chief Lloyd Blankfein made the pillow slip to Chicago personally to woo Groupon. The bankers broke out all these charts, said a source old(prenominal) with the meetings. They showed Eric a growth matrix that projected Groupon would be worth $25 billion in a few years. When he saw that, Google was toast (Popper, 2013). Finally, a merger between Groupon and Google could take years because of the antitrust laws. An acquisition is successful when the company has a draw plan with specific objectives and a timeline to complete the deal.In addition, successful acquisitions also include a way to finance the acquisition whether it is equity backing, cash reserves, or debt financing. A merger is successful when there is effective communication, effective leadership, and clear objectives and planning. In addition, successful mergers also involves the elimination of power struggles and Potential pitfalls might the feature entity actually be less profitable than either company operating independently? What are the risk factors with this potential acquisition?Explain and discuss financing options for financing mergers and acquisitions Even though bidding firms will pay a premium to acquire resources through mergers, this total cost is not necessarily more expensive than internal growth, in which the firm has to come up all of the costs that the nor mal trial and hallucination process may impose. While there are exceptions, in the vast majority of cases growth through mergers and acquisitions is significantly faster than through internal representation Apply principles of risk and valuation analysis to mergers and acquisitions