GM Acquiring Ford - Research Paper Example

Assignment When considering the acquisition of a company, it is very important to analyze the liabilities from the s to the financial ments because these can reduce the value of the assets of the target company, and in this way reduce the value and price that would be paid for its shares by the acquirer. It is important to study the footnotes to the financial statements of the target firm in order to make an opinion about the existence of off-balance sheet financing, guarantees of indebtedness of employees and directors, as well as other debt obligations.

For the year 2011, Ford Corporation had contracted $714 million of committed unsecured credit facilities with financial institutions due in 2014, as well as $7.9 billion of contractually-committed liquidity facilities provided by banks, from which $4.3 mature in 2012, and the rest in 2014. Ford Corporation classifies its long-term debt on the two sectors i.e. financial services and automotive sector. An overview of the amount registered for debt and long-term commitments is provided in the following tables.Table no.1 Structure of the long-term debt of financial services sector, Ford CorporationLong-Term Debt Financial Services Sector ($ millions)Unsecured debt32311Asset backed debt37159Table no.

2 Structure of the long-term debt of automotive sector, Ford CorporationLong-Term Debt Automotive Sector($ millions)Public unsecured debt securities5,183Convertible Notes736DOE Loans4,556EIB Loans698Other debt888Taking into account that debt securities register the higher amount of the financial services debt, it is important to analyze the maturity structure of the debentures. The figure no. 1 depicts the term structure of these debentures.Figure no. 1 Maturity structure of debt, Ford CorporationGeneral Motors went through a process of reorganization in 2009, and liabilities from that period are still considered in the structure of GM’s debt.

The following table depicts the description of debt for General Motors, considering also the amounts for Old GM.Table no.3 Structure of debt, GM CorporationDescription of Funding Commitment($ millions)UST Loan Agreement(b)20,933 EDC funding(c)6,455 DIP Facility35,521 Total62,909 As in the case of Ford, GM classifies its long-term debt by considering the automotive and financial sector. For the automotive sector, the long-term debt registers $ 3613 million and a total of liabilities of $ 96792 million (as it can be seen long-term debt is a small portion of the total).

The financial sector totals liabilities of $ 8820 million; a structure of these sector facilities is provided in the following figure.Figure no. 2 Structure of financial sector debt, GM CorporationFrom the graph, it can be seen that securitization of notes payables registers the highest percentage in what characterizes the financial sector of GM.ReferencesFord Corporation (2012). Annual Report 2011. Retrived from http://www.ford.com.General Motors Corporation (2012). Annual Report 2011. Retrived from http://www.gm.com.