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Financial Management and Entrepreneurship

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Financial Management and Entrepreneurship

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Description

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
2.1. Alumex PLC
2.2. Lanka Aluminium Industries PLC
2.3. Profitability
2.4. Liquidity
2.5. Efficiency
2.6. Capital Structure
2.7. Stock Market
3. Working Capital Management
3.1. Importance
3.2. Working Capital Management at Alumex & Lanka Aluminium
4. Recommendations
4.1. Financial
4.2. Non-financial
4.3. Independent View
5. Scope for further research
6. References
Preview

Executive Summary
This report is analyzing the case of options available for Access Engineering PLC to diversify their business operations into the Aluminium industry, which is a sub sector of the constriction industry. The possible acquiring companies are Alumex PLC and Lanka Aluminium Industries PLC who are the leading Aluminium related product manufacturers in Sri Lanka.
In deciding the best company among two companies, a comprehensive financial analysis is conducted. The ratio analysis is conducted in terms of profitability, liquidity, operational efficiency, capital structure and stock market performance. Since these are the key areas of consideration in terms of the financial performance and profitability, the best performer in terms of these ratios can be finalized for the acquisition.
The importance of working capital is also considered with the funding structure followed by each of these companies. It was observed that Lanka Aluminium have the highest equity and short-term borrowings which will be beneficial for an acquisition and the asset funding. Then the final recommendation is made on what company is to acquire basing on both the financial and non-financial data.
Overall, after evaluating all above factors, it is concluded that Lanka Aluminium can be selected as the possible acquiring company given their performance and the market synergies that will create when acquired by Access Engineering which will be cost beneficial, operational efficiency and profitable for the group as a whole.

1. Introduction
This report summarizes the performance of Alumex PLC and Lanka Aluminium Industries PLC which are operating in the construction industry in Sri Lanka. Basing on the outcome of this analysis, recommendations will be made to Access Engineering PLC, which is focused on related diversification through a merger and acquisition strategy.

2. Objective
Access Engineering PLC is a successful venture in the construction industry which has marked their brand name with their quality services provided. They are seeking for a related diversification which needs to create synergies in their operations and allow them high market power. Thus, the main objective of this related diversification is to generate synergies via forward and backward integration of costs and benefits of the companies operating within the same industry, which will improve the efficiency of AEP and create competitive advantage for AEP against its competitors. (Access Engineering PLC, 2022)

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