The Concept of Mergers and Acquisitions - Essay Example

? WAS THE WILLIAM HILL ACQUISITION OF STANLEY LEISURE WORTHWHILE? Contents Introduction 4 Research Questions 4 Background of the Study 7 William Hill8 Stanley Leisure 11 William’s Takeover 12 Reasons for Takeover 12 Literature Review 13 Post-Takeover Performance 13 Financial and Strategic Motives for Acquisition 14 Conceptual Framework 16 Working Capital Components by Use of (CAPM) 16 Mathematical (CAPM) 17 Hypotheses, Data and Methodology 18 Introduction 18 Hypothesis 18 Hypothesis One (H1) 19 Hypothesis Two (H2) 19 Capital Assest Pricing Model (CAPM) 19 OLS Regression Model 21 Data Analysis 22 Data Interpretation 22 Critical Discussion 22 Limitations of the Research 23 Strengths of the Study 24 Further Analysis 24 Summary and Conclusions 25 Major Findings 25 Conclusion 25 References 27 WILLIAM HILL WORKING CAPITAL MANAGEMENT IN ACQUISITION OF STANLEY LEISURE BY WILLIAM HILL WAS THE WILLIAM HILL ACQUISITION OF STANLEY LEISURE WORTHWHILE? Abstract According to ‘Financial Times,’ William Hill (largest betting bookmaker in the UK) is set to purchase a diverse empire of Stanley Leisure (largest casino operator in the UK). On William Hill portfolio diligence, I will discuss the working capital management for acquisition of Stanley Leisure. In this report, I analyse the due diligence guidelines that are predisposed to assist William Hill in capital evaluation of Stanley Leisure, with statistical precision and performance reports. According to Horne and Wachowicz (2000), working capital management is an important component of corporate finance; it directly affects the liquidity and profitability of William Hill in acquisition of Stanley Leisure. Purpose, findings, and research questions that will guide the study are generated from the shareholders’ effects and the motives for acquisition. The data for this study will be the secondary data from Journal of Financial Economics. In the background study, I analyse the reasons for William Hill’s takeover and stipulate the post-takeover performance of the company. Motives for acquisition of Stanley Leisure and shareholders’ value are critiqued in the following project. In this project, I have used the capital assets pricing model (CAPM) in methodological analysis and OLS Regression for data sources. I can resolve if William’s merger was worthwhile through liquidity-based explanations. Introduction Mergers and acquisitions involve the amalgamation of two or more firms or the purchase directed to current firm within the foreign country. This was established by Whiting (1976) that acquisitions are effected through capital transfer, use of marketing skills, and presence of skill for management to increase the efficiency of the companies concerned. The development of better information systems in the global trade can enable a company increase its level of performance and meet its customer needs better. I will discuss in detail the research questions that will assist William Hill in acquisition of Stanley Leisure; due diligence need by William Hill is to enable the shareholders with adequate concept of underlying William acquisition portfolio than the prevailing market allocation of betting services. This gives the company sufficient evidence and confidence to leverage the funding of the acquisition of Stanley Leisure. (Christen 2009). According to Robert (2009), due diligence gives a comprehensive analysis of appraisal techniques and interpretation of acquisition results for both the firms involved. William Hill has to identify the risks associated with acquisition portfolio and formulate dynamics to make up for the loss that might come along. Research Questions In this, research William Hill has to investigate various pieces of information and statistics. It has to: 1. Evaluate how working capital management will assist in the profitability of its firm. 2. Analyze how working capital management affects its profitability. 3. Find areas where investments activities need to be implemented. 4. Are the components of working capital of high importance in evaluation of Stanley Leisure capital? The basic focus in managing working capital should be to optimize the firm's investment in them. Working capital management seems to be instrumental in enabling William Hill to keep an appropriate balance between having enough cash to conduct its operations and having excess cash so that profitability is reduced. One of the general objectives of this study is to determine the impact of working capital on the profitability of William Hill in the acquisition of the Casinos of Stanley Leisure. The other objectives include: 1. Finding out relationship of working capital management and Profitability of acquisition of the Stanley hill. 2. Establishing shareholders total effects in the process of acquisition of Stanley. 3. Stipulating the motive of acquisition to the shareholders’ keeping them in line with the acquisition process, thus ensuring confidentiality in the purchase of the largest casino operator. 4. Responsiveness in changing customer demands and the provision of services that are placed at a high regard by customers. 5. Adoption of better technological gambling for competitiveness with other firms (Landbrokers and Betfair). (Ozgit, 2005). 6. Generation returns to William Hill shareholders. 7. Generating a fair return to shareholders. 8. Ensuring sufficient enhancement of transparency and corporate governance on acquisition of Stanley Leisure. This study was organized in the articulation of the Stanley Leisure and analytical and methodological analysis of acquisition of Stanley Leisure by William Hill. Its liquidity risk analysis has been formulated to ensure the overall profitability of the firm. A conventional significant measure of the trade value has to be analysed and presented in the working on William Hill portfolio of due diligence, but it is considered irrelevant, hence requiring specific and unique measures to deal with the acquisition worthiness (Ozgit, 2009). The next sections discuss the backgrounds of both the companies and their overall growth and development during the last gambling and gaming transactions; this includes their share values and customer retention opportunities. The introduction also deals with the William Hill’s takeover of Stanley betting shops and with the reasons why they decided in favour of takeover (problem statement). The next sections review literature for working capital and post-takeover performance of William Hill. We have two types of working capital—the positive working capital and the negative working capital. The components of working capital include the sources of working capital, management and liquidity in relation to working capital. We examine the motives of acquisition, both financially and strategically. The conceptual framework is also included in this section. It summarizes the independent and dependent variables in post-takeover performance. Working capital management is the independent variable, whereas profitability on acquisition is the dependent variable. 1The previous section presented a conventional measure of liquidity for which trade size is irrelevant. Useful information can presumably be gleaned from prices and depths beyond the bid-ask spread, therefore different versions of liquidity are worth analyzing. (Ozgit, 2005). The next section deals with the hypothesis, data analyses, and methodology. Our interest group will be William Hill. The type of data required for this study is mainly secondary data for stock, returns, market returns, and risk-free return. It will be collected through analysing the financial statements of the firm through OLS regression. The data will be edited and analysed using descriptive statistics, namely percentages and ratios. The study will also employ the use of statistical tools like Microsoft Excel for data analysis. The data will be presented using tables, charts, and graphs. Data methodology will incorporate Capital Assets Pricing Model (CAPM), by evaluating the event window, testing period, and estimation period. ‘Hypothesis Testing’ will incorporate the null hypothesis for William Hill shareholder value. I will stipulate on the overall results of post-takeover performance. The resultant data includes data analysis, data interpretation, and data critical discussion. In addition, the limitations and further analysis will be logically analyzed while conducting study. This helps to ascertain the strengths and weaknesses of the study. In conclusions, I will provide guidance on the major findings in portfolio due diligence of William Hill and give the impacts of shareholder value in acquisition of Stanley Leisure by William Hill. Background of the Study The predecessors to the current statement of cash flows had a variety of titles for example: 1. Statement of sources and uses of working capital 2. Statement of source and application of funds 3. Statement of changes in working capital 4. Statement of changes in financial position In most cases, the use of the term ‘funds’ referred to working capital, i.e. current assets minus current liabilities. Formats varied, but the statement usually opened with net income or loss, and then included adjustments for non-fund, i.e. non-working capital, revenues, and expenses. Following this, changes in balance sheet accounts that affected working capital were incorporated into the statement. The funds flow statement was designed to provide information about the flow of financial resources; the funds beyond that were provided by the income statement and balance sheet. The earliest discussions focused more on details of construction and less on the objectives or potential uses of the statement. Some accounting scholars identify the origin of the statement as far back as the middle of the nineteenth century. However, it is difficult to locate actual financial statements or annual reports of these periods. This study is based on previous researches done on the general aspect of capital. Firms have different capital structures depending on their size and activities. Working capital being a part of the capital structure has lead to developments in the working capital policies, which concentrate on how the working capital should be financed. The shareholders of William Hill have a bigger share on the working capital (William et al, 2008). William Hill According to Alper (2005), William Hill was established in the year 1934 AD. It trades publicly on London Stock Exchange, and this assists betting and gaming for the gambling individuals. Its shares commenced trading in 2002 June. The late William Hill founded the company, and from then it has developed and grown in stature, dominating the current UK industry. It is mostly used in betting services and the gambling opportunities. Its operations cover high street shops, telephone, sports, and online gaming. William Hill has 25% share in retail betting; it had a wide range of shops numbering 2300, and about $15 billion takings in the previous years (William, et al, 2009). In the UK, there has been a higher contentment in gambling sector; people regard this sector as a higher biding scene. The gambling market has grown to be a stable and dynamic industry in Britain and it has gross worth $ 4.076 billion accrued as a result of online sales and the rapid betting retail shops. It is in competition with Ladbroke’s, Coral, Betfair and Betfred that include betting shops. It is the largest betting entity in Britain and commands as much as 45% of regular bettors. (Kantar, 2010). William Hill has about 16,600 employees in the UK, Israel, Philippines, and Bulgaria. It has been in the headlines for betting games since 2002, and it has given a better fair in the London Stock Exchange. William Hill has its presence in betting customer services sector. It has a customer roulette offer in its gaming machines. In its sports book, William Hill serves a variety of customers in its legal framework in about 175 countries in a number of currencies. In website management, it provides skill games and online bingo. In probability measure of William Hill, shareholders tend to determine the working capital. William Hill is approximated to generate, around 106.1 million from online casino, online poker, and sportsbook online (Ozgit, 2005). Ladbrokes has a better working capital in poker and it dominates ground in sportsbook segment. That is why William Hill is in sizzling form to acquire 640 betting shops from Stanley Leisure to improve its working capital performance and liquidity level. In this aspect, I will consider two basketball teams in a betting game in William Hill online betting (outcome of the team is betted upon). Examples of basketball online betting in William Hill Gross returns for every dollar bet Back lay Lakers 2.21 (200$) - Spurs 1.7(50$) 1.71(1000$) A better in Lakers can bet and score in betting by maximizing on quote of the market 2.2. If the hit of the market is greater (160$), the betting orders are filled and in the continuation of betting the rest of betters’ assets becomes limit in Back lay market side. New LOB Back lay Lakers 2.2(60$) 2.21(200$) Spurs 1.7(50$) 1.71(1000$) Or a better from Spurs can bet and score in betting by maximizing on quote of the market 1.71 and on the available quantity of 1000$. (Ozgit, 2005) New LOB Back lay Lakers 2.2(100$) 2.21(200$) Spurs 1.7(50$) 1.71(200$) Tables: Alper Ozgit, Department of Economics, UCLA, (29 September 2005) In the backing of the team, it is betting that the results and the overall outcome of the team game will win. There is enormous transparency in betting services to the public. In the next segment, we will analyze the Stanley’s core values in the process of working capital management as William Hill counters on due diligence of its portfolio for acquisition. Stanley Leisure Stanley Leisure is a casino that has been in the market for the last 40 years. Founded in 1976 by Lord Steinberg, it has a chain of 640 outlets for betting and 45 casinos. Stanley’s purchase in terms of development and diversified growth of casinos and brisk growth of casinos in the UK has been influenced by the high demand for betting services and gambling activities within the under-served market. It is termed either a ‘treasure market’ or a ‘risk market’. Stanley Leisure has built its portfolio through either merger with or acquisition of other firms. According to BBC (2006), Genting already owned about 20% of Stanley Leisure's shares. Announcing the agreed bid, it said that Getting had bought a further stake of nearly 11% from the UK firm's founder and Chairman Lord Steinberg. This is how William Hill is set to diversify its betting services through acquisition of Stanley Leisure. Casinos seem to attract various foreign entities; hence profitability for William’s working capital. According to BBC (2006), Genting International Chairman Tan sri Lim said: "We are delighted that the board of Stanley is recommending this offer and look forward to Stanley joining Genting International to create an even stronger base for its future in the UK and the rest of Europe." William’s Takeover According to Financial Times (2005), talks of William Hill with Stanley Leisure were to yield in its acquisition of 600 betting shops. This acquisition involved a large amount of money; it was set to surpass other betting firms. It would become the UK’s biggest betting operator, even ahead of Ladbrokes. Reasons for Takeover Puttni (1980), an expert in the financial management, is of the opinion that problem of working capital is one of the factors responsible for the low profitability. Past studies focussed on the working capital of manufacturing industry which differs in structure from commercial banks. Better planning and control of working capital, or in other words, proper utilization of optimum quantity of working capital could increase the earning power subject to the existence of operating margin. William Hill faces the liquidity risk; and establishing the levels of working capital to deal with liquidity risk remains a challenge. The basic focus in managing working capital should be to optimize the firm's investment. Therefore, working capital management seems to be important in enabling William Hill to achieve an appropriate balance between having enough cash to conduct its operations and having excess cash. Hence, the study concentrates on the impact of working capital on profitability of William Hill in post-takeover of Stanley Leisure. This takeover aims at contributing to better performance of financial institutions, especially William Hill in relation to working capital. It is becoming increasingly important as firms realize that approximately half of their total investment is in working capital. Sufficient investment in working capital has a significant impact on the total profitability of a firm. On the other hand, insufficient investments in working capital can seriously impair the operations of a firm. The research points out at the uniqueness of the composition of the Stanley Leisure’s working capital, which differs from that of the other firms. Literature Review Post-Takeover Performance According to Billie et al (2002), working capital represents operating liquidity available to a business. It measures how much liquid assets a company has at its disposal to build its business. The number can be positive or negative, depending on how much debt the company owes. Companies with major investments in working capital seem to be more successful since they can expand and improve their operations. William Hill company with a negative working capital may lack the funds necessary for growth. Amount of available working capital is a measure of a bank’s ability to meet its short-term obligations. According to Johnson (1993), the recent pressure on William Hill profits has not obviated the need for liquidity within individual betting firms or the system as a whole. Interestingly, the interest-sensitive deposits and other borrowings that challenged profitability have also significantly altered practices of liquidity management. Since a betting company can realize higher profits from assets that are relatively illiquid, there is a natural trade-off between profitability and liquidity. William Hill must invest as profitably as possible within reasonable limits of liquidity in its acquisition endeavours. Because of these potential conflicts, regulators in a number of countries have established minimum liquidity requirements. According to Superbrands Annual (2011) in post-takeover performance, William Hill will produce pre-match and in-play matches for football in its betting game. There will also be betting opportunities for events like cricket, golf, and spots pool. The acquisition will also be characterized by mobile betting where mobile [iPhone] applications will allow betting from mobiles (Johnson, 1993). Financial and Strategic Motives for Acquisition Motives for acquisitions directly relate to the liquidity in working capital management. According to Bendry et al (2004), liquidity or working capital ratios reflect the financial stability of a business and show how effectively the business is managing its working capital. Bendry states five main ratios: The current test ratio or working capital ratio: This gives an overall view of the financial stability of a firm. The current test ratio is usually expressed as a ratio rather than a percentage. It is a term used for current assets less creditors: amounts due within one year. The Acid test, quick or liquid capital ratio: This is a more stringent test of liquidity than the current test ratio. It shows the relationship between the firm’s liquid assets and its current liabilities. (Mike, 1996). Debt collection period or credit ratio: The ratio measures the average time in days or months that debtors take to settle their accounts. It attempts to give an indication of the effectiveness of working capital management. Credit period ratio: This ratio measures the average time in days or months that the business takes to settle accounts with their creditors. The stock turnover ratio: This ratio measures the level of activity concerning stock held by the firm. According to Goit (Microsoft word) in Mergers and acquisitions transaction, example working capital adjustment mechanism in a sale and purchase agreement is equal to Current Assets—Current Liabilities excluding deferred tax assets/liabilities, excess cash, and surplus assets. The working capital ratio is calculated as Working Capital = Current Assets – Current Liabilities C= A-L Blakely (2008) states that working capital management is a crucial function of the bank and any other financial institution. This is the reason why commercial banks have working capital policies; it includes consideration of how much cash to keep in cash account, what level of inventory to maintain, and how much to allow accounts receivable to build up. A firm must also decide whether to finance current assets with short-term funds, long-term funds, or a mixture of the two. The levels and financing decisions make up the firm working capital policy. S. Muindi (1989), states that working capital management generally deals with managerial decisions regarding the levels of investment in working capital and the financing of working capital. Issues relating to working capital and short-term financing are referred to as working capital management decisions. Conceptual Framework The model below illustrates the dependent variable and independent variable. The dependent variable is profitability and the independent variables are components of working capital. Independent variable Dependent variable Current Assets Profitability of William Hill Current Liabilities Profitability of William Hill Working Capital Components by Use of (CAPM) Main components of working capital are current liabilities and current assets, but since I am articulating on acquisition I will deal with the assets following the Capital Asset Pricing Model (CAPM). Current Assets: According to Weygandt and Sylvester (1991), current assets are cash and other assets expected to be converted into cash, sold, or consumed in one year or in the operating cycle, whichever is longer. They are presented in the balance sheet in order of their liquidity. This category includes cash, investments in marketable securities, receivables, loans, inventories (deposits) and prepaid expenses. To qualify as a current asset, an asset must already be cash, capable of being converted to cash or used up within a relatively short period without interfering with normal business operations. They are tied to an enterprise’s operating cycle. Mostly, one year is the period used to identify current assets, so any asset expected to be converted into cash within one year is classified as a current asset in the enterprise’s balance sheet. In a balance sheet, current assets are listed in order of liquidity (the closer an asset is to becoming cash, the greater its liquidity) One would not find inventory, accounts receivable, or accounts payable. Instead, under assets, you will see mostly loans and investments, and on the liabilities side, you will see deposits and borrowings. The operating cycle of the business is where value is created from the non-monetary assets of the business, and cash and other monetary assets are generated. However, different businesses have different policies with respect to the management of their working capital, which are partly a matter of choice and partly a consequence of their financial characteristics of the business in which the firm is engaged. The key ratio for measuring working capital and its prominence in the balance sheet is the current asset ratio. The current asset ratio is the sum of the current asset divided by the short-term liabilities. According to Ryan (2004), in the balance sheet, when the working capital is employed in the firm and if fully invested in fixed and other long-term assets, the working capital will be zero and the current asset ratio will be at its neutral value of one. The working cycle has a critical role to play in the internal financing of capital investments. The presence of substantial equity reserves in the balance sheet does not necessarily mean that a firm is able to engage in capital investment unless there is sufficient liquidity within the business to finance the acquaintances. In William Hill portfolio diligence, it has to measure the market portfolio and the market capitalization in acquisition of Stanley Leisure. Mathematical (CAPM) In acquisition of leisure, he encounters 1,……, y risks totaling = j we find Market capitalization of STANLEY LEISURE to be: MCAPj = (price per share)j ? (# of shares outstanding)j. NB Total capitalization= MCAPM =?yj=1 MCAPj. wj = MCAPj = MCAPj ? yi=1 MCAPi MCAPM William Hill portfolio is denoted by WM. (Wang, 2003). The market portfolio is the portfolio of all risky assets traded in the market. The market capitalization of an asset is its total market value. Hypotheses, Data and Methodology Introduction In this section, we analyse the methodologies to be adopted and used in this study. It describes the statement of ‘hypothesis test’ (null hypothesis), concerning the shareholder value. Then we have data methodologies using Capital Asset Pricing Model (CAPM). They all include the event window, testing period, and estimation period. My data sources will analyse stock returns, market returns, and risk-free return by using OLS regression analysis. Our target company is Stanley Leisure. Hypothesis In all hypotheses testing for William Hill in acquisition of Stanley Leisure, we deal with the aspects of geographical expansion and the protection of market share. In this research, I have entailed on the interaction of financial systems for William Hill and that of Stanley to promote the growth and takeover performance of the company. The second hypothesis analyses the effects of acquisition of shareholders’ value. According to Wendy (2003), institutional factors can upset the investments scales and assist in the equations of investments management and the research and development tabulations. Hypothesis One (H1) According to Wendy (2003), the coefficients on the interaction between the proxies for information disclosure (accounting standards) and equity dependence are positive in growth and investment; equations ( g1 > 0; j1 > 0; and r1 > 0) and more significant in the R&D than in the fixed investment equation [Stanley Leisure acquisition as William seeks to protect its market share] Hypothesis Two (H2) According to Wendy (2003), the coefficients on the interaction between bank concentration and bank finance dependence are negative in the growth and investment equations in [established] developed companies. Shareholders’ value is limited to (I 5o0; j5o0; $ r5o0) and more significant in the R&D than in the fixed investment equation. (Wendy 2003) Capital Assest Pricing Model (CAPM) In due diligence market portfolio for William Hill, we are supposed to get the tangent portfolio. 1. In risk combination, we are able to employ various tasks of risk free asset so that we can have an overall portfolio frontier. 2. Risk assist in co-variability between Stanley assets and William Hill market portfolio. 3. William Hill needs to bear the systematic risk which cannot be diversified in any way. 4. In William Hill market portfolio, the risks not correlated with it [non-systematic risk] can be diversified through portfolio frontier holding. This type of non-systematic risk should not be rewarded. Wang (2003) Capital Asset Pricing Model (CAPM) B For any asset i: E[?ri] ? rF = ?iM (E[?rM] ? rF) Table: Jiang W. Fall, Lecture Notes, 2003, 15.407 ?iM = ?iM/?2M William Hill deals with the assets of Stanley Leisure through calculations of risk premiums and the beta markets. These are referred to as Security Market Line (SML). I can illustrate this with a graph. Security Market Line (SML) M SML rM rm-r m ri r F r m –r F ? ?M = 1 ? Graph: Jiang W. Fall, Lecture Notes, 2003, 15.407 So, William Hill in its acquisition of Stanley Leisure’s 14% and 5% respectively, so the expected return for both parties will be 50%, with 50 per cent to make the market portfolio. The answer for William Hill is expected to be. r = (0.5) (0.05) + (0.5) (0.14) = 9.5% (Fall, 2003) OLS Regression Model In OLS regression, William Hill is able to solve explanatory variables and to counter for acquisition of Stanley Leisure. The dependent and explanatory variables are well-articulated by OLS model in the transaction of businesses. According to Econometrics Laboratory, (1999), the simplest linear model is y _ _ x _ _ which specifies a linear relationship between the dependent variable y and the single explanatory variable x. 1 0.8 0.4 0 O.4 0 0.5 1 TABLES: Econometrics Laboratory, University of California at Berkeley, 1999 Data Analysis The data will be edited and analysed using descriptive statistics, namely percentages and ratios. Data Interpretation The study will also employ the use of statistical tools like MS excel for data analysis. The data will be presented using tables, charts, and graphs. This will help in interpretation of the mathematical ratios for acquisition of Stanley Leisure casinos. Critical Discussion My discussion entail on the worthiness of acquisition of Stanley Leisure and the prevalence of William Hill working capital. We have to analyse the profitability ratios of both the companies and the overall impact of merger and acquisition. Limitations of the Research According to Cooper and Schindler (2006), research design is the plan and structure of investigation so conceived to obtain answers to research questions. The study will follow an analytical research design, which will use facts and information already available and analyse them to make a critical evaluation of the data. In this process of research there lie some limitations and hindrances: Time The research process requires adequate time for it to be effectively carried out. Since there is little time and a lot is to be covered during this time, it is quite challenging. Solution Time will be spared during this coming holiday to collect data and use the first week of the next semester before classes resume collecting more data. Finances There is a lot of monetary input required in carrying out a research. Solution Funds will be contributed towards the research. Disclosure of the information Managers might be reluctant to allow us access their financial statements. Solution: The researchers will ask the University for Introduction Letters. Strengths of the Study Its features allow researchers to engage in shareholders feedback and self-assessment. This creates a conducive learning environment for research. This platform allows communicative context that encourages interaction between researchers. The fact that this platform is available to researchers and interested parties in an unrestricted timeframe means that the researching process is not hindered in any way. Total cost of ownership of William Hill in acquisition of the Stanley Leisure is reduced. Further Analysis Further analysis on the other betting companies—Ladbrokes and Betfair. According to W Carlina, (2003) Ladbrokes Limited is the betting and gaming division of the Hilton group; it has around 2,000 betting shops in the UK, and it has been the biggest operator in the UK until acquisition of Stanley leisure casino by William Hill. Like William Hill, Ladbrokes does not accept wagers from the US. According to W Carlina, (2003) Betfair is the leading betting exchange; established in 1999; it had become operational in 2000; Betfair operates mostly on an online basis, but it also provides its customers with the option of phone betting. Summary and Conclusions Major Findings The major findings in my research include the Betfair analysis, in comparison with William Hill. According to Wendy Carlina, (2003) the exchange the average over round is 1.011 (standard error 0.007), whereas at William Hill the average over round is 1.042 (standard error 0.007). This makes the significance levels of exchange cheaper in betting chances. Conclusion Of the research I conducted on betting industries, I conclude that it is one of the most profitable assets acquisitions in the market. The financial markets have the same implications with the financial markets. There is a high hybrid structure mechanism for both companies in the acquisition of Stanley Leisure. For William Hill, it has been a worthy course of action as its pure returns are high. By investing $2.1 billion (the betting exchanges) in the acquisition, William Hill was able to liquidify its asset and maintain a fragmented market. According to Wendy Carlina, (2003) utilizing a unique data set of NBA games played between December 2004 and February 2005, I show that the selected exchange, Betfair, offers significantly higher returns than bookmakers, William Hill and Ladbrokes do. In acquisition of Stanley, leisure market microstructure has been generally analysed and asset value has been considered. The liquidity matters in the acquisition of Stanley Leisure assist as in optimization of worthiness of the company. There are higher returns to William Hill after acquisition of Stanley Leisure as concluded in the conceptual framework analyses. The execution costs in the working capital management assist William Hill in the acquisition process. The gambling should be well regularized to ensure sufficiency in acquisition process. In my study, I have concluded that the acquisition of Stanley Leisure gives higher returns, that it is a worthwhile project. 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