International financial markets DB 1 - Assignment Example

International financial markets Task: Introduction Acquisition of JEL will be the preferred choice since it is in the European Union (EU). The EU provides countless benefits to any firm that operates in nations that belong to the economic block. The benefits predominantly result from the trading block that the union has created. Conversely, the acquisition of JEL will present considerable hurdles to ACME. However, the acquisition of JEL will enable the entity diversify its operation in a key trading block.

Certainly, acquisition of JEL represents a shrewd investment. Alternatively, acquisition of DBC Industries is also a shrewd option but the organization would face certain limitation in accessing the EU market, which is central to any entity seeking a global presence. Advantages The prime pro of acquiring JEL is that it will grant the holding entity, ACME easy access to the EU market. JEL is a resident of EU. Therefore, the entity has unlimited access to the entire trading block. The EU represents a key market that any entity seeking presence on the global front would yearn to trade.

Moreover, the market provides an expansive clientele base to firms that target this block. The EU market provides stringent market rule for foreign companies that seek access. Therefore, acquisition of DBC Industries would have limited ACME’s access to this lucrative market. Notably, the EU market provides stern regulations to business in this market. Therefore, limiting malpractice and trading in substandard goods. This will imply that if ACME seeks to acquire goods from entities in this Union it will get quality commodities.

Acquisition of this entity that operates in the EU economy is a diversification of ACME’s venture portfolio. The diversification will enable ACME maintain certain levels of income despite plummeting revenues in of any the market that the holding corporation operates. Additionally, ACME can seek extra capital from Europe to support it operation. Therefore, acquisition of JEL will provide the ACME with an opening to seek financing for its undertakings (The German Marshall Fund of the United States, 2009).

Disadvantages Acquisition of JEL will transform ACME into a group entity with the latter being a holding entity. Therefore, the managers at ACME will encounter tough hitches while consolidating the records of both entities. This presents a considerable hurdle to managers in this entity since they will have to adhere to countless reporting standards. Though most reporting guidelines are similar, there are considerable disparity in reporting of entities in Europe and America. JEL will provide its reports in Euros subsequently demanding conversion into Dollars.

Additionally, acquisition of JEL will terminate in flow of financial resources from the holding entity, ACME. The funds committed towards the acquisition of this entity represent capital flight. The capital flight will represent a loss of resource for America since the holding entity is American. This will be a gain for EU union since it denotes influx of investment. Acquisition of DBC industries would have culminated in similar hitches. However, the hurdles resulting from acquisition of JEL are sever since the entity operates in a market that the EU seeks to guard ensuring that the members are the chief beneficiary (Eicke, 2008).

References Eicke, R. (2008). Tax planning with holding companies: repatriation of US profits from Europe : concepts, strategies, structures. Netherlands: Kluwer Law International. The German Marshall Fund of the United States. (2009). The effects of EU climate legislation on business competitiveness. Retrieved from http://www.theclimategroup.org/_assets/files/The_Effects_of_EU_Climate_Legislation_on_Business_Competitiveness.pdf