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. Alterigo 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.
Alterigo 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, Alterigo Corporate works with Alterigo 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 Alterigo´s approach and strategy, please submit a business plan or executive summary to the below address or electronically.
Alterigo Corporate Finance Partners, LLC
20501 Ventura Blvd. Suite 270
Woodland Hills, CA 91364 |
