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Financial Management – Aitken Spence Hotel Holdings PLC and John Keells Hotels PLC

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Financial Management – Aitken Spence Hotel Holdings PLC and John Keells Hotels PLC

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You work as a Financial Analyst for a firm of international management consultants. A very large multinational company has approached your firm for advice. The client is considering diversification through an acquisition strategy. As part of your assignment you should name this company (acquirer firm).

Select two companies in the same industry which must be Public Companies listed in a globally recognized stock exchange. You need to discuss key financial and acquisition aspects of the two selected potential acquisition targets in relation to the tasks shown below;

Task-1

Undertake the necessary research and write a report to the client which:

  1. Critically evaluates and compares the financial performance and financial position of the two potential target companies using the published financial statements within the last three years. You should analyse the financial performance and financial position of these firms through the use of financial ratios (the detailed computations of the financial ratios should be provided in the appendix of the assignment). (Suggested word count 1100 words)

Task-2

The client is particularly concerned with one key aspect of these potential target companies, namely the management of working capital.

  1. Critically analyse the importance of working capital management (suggested word count 300 words)
  2. Compare the working capital management of both firms over the last three years. (Suggested word count 400 words)

Task- 3

  1. Your report should conclude with a reasoned argument as to which company – if either – might be the preferred acquisition target in terms of financials. (Suggested word count 300 words)
  2. Non-financial factors, in particular how the target acquisition fits in with the current strategy of your acquirer firm. (Suggested word count 400 words)

Additional information

Table of Contents

1. Introduction
2. Objective of Acquisition
2.1. Aitken Spence Hotel Holdings PLC
2.2. John Keells Hotels PLC
2.3. Profitability
2.3.1. Comparison
2.3.2. Reason
2.3.3. Areas for investigation
2.3.4. Critical Evaluation
2.3.5. Challenge
2.3.6. Recommendation
2.4. Liquidity
2.4.1. Comparison
2.4.2. Reason
2.4.3. Areas for investigation
2.4.4. Critical Evaluation
2.4.5. Challenge
2.4.6. Recommendation
2.5. Efficiency
2.5.1. Comparison
2.5.2. Reason
2.5.3. Areas for investigation
2.5.4. Critical Evaluation
2.5.5. Challenge
2.5.6. Recommendation
2.6. Capital Structure
2.6.1. Comparison
2.6.2. Reason
2.6.3. Areas for investigation
2.6.4. Critical Evaluation
2.6.5. Challenge
2.6.6. Recommendation
2.7. Stock Market Performance
2.7.1. Comparison
2.7.2. Reason
2.7.3. Areas for investigation
2.7.4. Critical Evaluation
2.7.5. Challenge
2.7.6. Recommendation
3. Working Capital Management
3.1. Importance of working capital management
3.2. Working capital management at Aitken vs JK Hotels
4. Recommendations
4.1. Financial
4.1.1. Profitability
4.1.2. Liquidity
4.1.3. Efficiency
4.1.4. Capital Structure
4.1.5. Stock Market
4.2. Non-financial
4.2.1. Cross business strategic fit
4.2.2. Increased market share
4.2.3. Group synergies
4.2.4. Cost efficiencies
4.3. Independent View
5. Scope for future research
6. Reference
7. Appendix
Preview

1. Introduction
This report will analyze the performance of Aitken Spence Hotel Holdings PLC & John Keells Hotels PLC which are operating in the hotel industry. The aim of this report is to provide recommendations for Hayleys group for diversification through merger and acquisition. The initial part will analyze the financial performance via ratio analysis for 3 years. The latter part of the report will focus on non-financial analysis and check on the strategic fit of the acquisition for the acquirer’s group and make recommendations on the acquisition.

2. Objective of Acquisition
Hayleys Group PLC currently have a smaller presence in the tourism industry in Sri Lanka with their signature town hotels and boutique hotels. They provide all kinds of services to hotels varying from supply of food to tour guiding. The company is looking for market synergies and increasing market presence by acquiring a chain of hotels who have marked their presence in the international tourism as well. It is expected that the acquiring company will bring in efficiency improvements and forward and backward integration for cost benefits to the Hayleys group.

2.1. Aitken Spence Hotel Holdings PLC
Aitken Spence Hotel Holdings PLC is a subsidiary of Aitken Spence group which is a multi-industry conglomerate in Sri Lanka. The company have 8 resorts and hotels in Sri Lanka with total 22 resorts and hotels in India, Oman and Maldives. The company was established in 1974 and has been serving the Sri Lankan tourism industry while contributing to the GDP growth under the Hotel sector. (Aitken Spence Hotel Holdings PLC, 2022)

2.2. John Keells Hotels PLC
John Keells Hotels PLC is a subsidiary of the famous John Keells group which is another multi-industry conglomerate in Sri Lanka. They have a total of 12 resorts and hotels in Sri Lanka and 4 hotels in Maldives. The company was established in 1979 and operated until in 2005 they launched all their hotels under the “Cinnamon” brand. JKH is also a main contributor to the Sri Lankan economy via their contribution for both the GDP and tourist attractions for their hotel chain. (John Keells Hotels PLC, 2022)

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