Applied Mergers and Acquisitions - Example

Mergers and Consolidations (plagcheck) February 9, Report Introduction Several companies have merged or consolidation. The timely mergers or consolidations were done to increase the combined companies’ presence in the competitive target markets. The current research explains the intricacies of the BDO LLP and PKF LLP merger. Mergers and consolidations generate profitable synergy. Economies of scale A merger occurred between United Kingdom’s Pannel Kerr Forster (PKF) International and BDO LLP. Both companies are engaged in accounting, auditing, business consultancy and other business related endeavors. The merged company’s new name is BDO LLP. The merger between the two accounting firms generated significant economies of scale. The combined company is composed of an estimated 3,500 employees. The new company has a bigger group of 300 partners. Likewise, the new company’s offices grew bigger. Specifically, the new company has 24 branches. The branches are located in London, Wales, Midlands, Scotland and other locations (BDO, 2014). Mergers occur when two or more companies combine (Carney, 2009). When one of the original companies retained as the name of the combined company, the combination is classified as a merger. In the current issue, the combination between BDO LLP and PKF LLP is a merger as BDO LLP is retained as the name of the combined company (Faulkner, 2012). On the other hand, a different name is given to the combined company. A merger occurs when a new name is given. If the new name of the combined company is not BDO LLP or PKF LLP, the business combination is classified as a consolidation (Bruner, 2011). The Pannel Kerr Forster (PKF) International is a global accounting firm. The company delivers accounting and other related business services to clients. The company delivers quality business related services to clients in over 124 countries. In 2010 alone, the company belongs to the world’s top 10 accounting firms. Prior to the integration, PK LLP continued to financially generate high demand for its accounting, auditing, management advisory and other services. In terms of economies of scale, the merger between BDO LLP (Wooller, 2012) and PKF LLP has some cost advantages. One of the cost advantages is an increase in size. The merged company is a bigger unit compared to the two companies working their previously separate ways (Galpin, 2010). With the increase in size, the corresponding cost per unit of production will drop. For example, four people working in one room will generate lower room rent cost compared to one person working in the same room. The fixed costs of using a building will remain the same as the size of the merged companies increase, reducing the fixed cost’s unit cost amount of each. The original BDO LLP Company has several United Kingdom branches. The branches are strategically located in Bristol, Chelmsford, and Glasgow. Other branches include the Hatfield, Manchester, Southampton, and Sheffield offices. Finally, the company’s head office is located in the heart of London. Economies of vertical integration; The combined companies implemented economies of vertical integration (Casson, 2012). Each company continued serving the needs and demands of its own market segments. Each company generated its own revenues and profits. Consequently, the combined revenues and profits equates to the merged companies’ vertical integration. The original BDO LLP continues to fill the economic demands of its current and future customers. Similarly, the PKF LLP increases the services rendered to its current and future clients. Vertical integration ensures there is no disruption or diminishing effect of the merger or acquisition on each of the two companies’ individual customers. The company offers financial services (Rittenberg, 2011). The services include helping the current and future customers with their tax issues. With the complex tax laws of the United Kingdom and other countries, the well- trained line and staff employees of both the PKF LLP and BDO LLP divisions can easily intercede for the customers’ tax issues. The line and staff employees will literally ensure all accounting records are in compliance with establish international financial reporting standards, correct and fairly presented. Combining complementary resources; Both companies combined complementary resources (Samson, 2012). BDO is a United Kingdom limited liability company. The company is registered in both England and Wales. BDO offers business advisory services to its global market clients. BDO is one of the top business advisory firms in the United Kingdom. PKF is another business and accounting firm (PKF 2011). The company offers accounting, auditing, business consultancy, and other business services to clients from around the world. The company serves the business consultancy needs of clients from more than 123 countries. In 2010, PKF was ranked as one of the top 12 accounting and business consultancy firms in the world. In 2000 alone, the company generated an estimated $2.5 billion consultancy income. The company has set up more than 435 branches in different locations around the world. Elimination of inefficiencies; The merger eliminated the related inefficiencies. By maximizing the company’s scarce resources, the inefficiencies are reduced to allowable levels. The line and staff employees of both companies eagerly combine their expertise. With the combined expertise fused into one bigger company, the merged company can significantly reduce all certain slacks. For example, the employees of BDO can learn the intricacies of inventory management from the employees of the PKF entity. In the same manner, the feasibility study expert of PKF can teach the neophyte employees of the former unmerged BDO Company the most strategy method to conduct a customer research (Samson, 2012). Increased power in the market; The combined company generated a higher power in the market. With a bigger workforce, the combined company can reach more new customers (Ittelson, 2009). Likewise, the combined employees of the two prior companies, BDO and PKF, increase the new company’s market presence. The many customers consider a bigger company as a more powerful company. With more employees, the company is presumed to have bigger facilities. Likewise, the bigger companies are assumed to have more business equipments, including information technology equipments. With more customer-based equipments, more jobs are accomplished (UnitedNations, 2010). With more jobs, more customers are satisfied with the combined company’s business consultancy services. With more satisfied customers, the customers’ demands for the combined BDO LLP Company’s services increase. Speed of growth; With the combination, the growth speed is increased (Carney, 2009). Each company has luxury of generating clients from the clients of the other company (Belkaoui, 2004). PKF can generate new clients from the client database of BDO. Similarly, BDO can persuade the clients from prior PKF Company to use the services of the BDO employees. With more client interactions, the merged company’s revenues will create a profitable synergy (Karenfort, 2011). Further, a synergy occurs when the sum of the revenues, outputs, profits and other factors of the two combined companies are significantly higher than the revenues of the individual companies (Pattison, 2009). Since the employees of BDO can capture the clients of PFK, BDO’s own revenues will skyrocket to unprecedented levels (Latash, 2008). Similarly, the workers of PKF can generate revenues from the clients of BDO, increasing PKF’s current revenues (Sanghoee, 2010). Similarly, the additional customers of the synergy’s employees will increase their intellectual and financial growth (Gaughan, 2005). Financial Benefits After the merger, the new company has an increase in the number of personnel. The synergy’s additional personnel will contribute to additional services (Davies, 2008). The additional employees can serve the feasibility study needs of new entrepreneurs (Otto, 2009). New entrepreneurs need the services of business consultancy firms. The firms conduct feasibility studies. The feasibilities studies determine whether a project or plan will be able to generate high revenues (Munsaka, 2013). Likewise, the feasibility studies will contribute to the new entrepreneurs’ new insights on possible business ventures. The feasibility studies will show which projects may result to future net losses (Manjunath, 2010). Clearly, the additional employees can deliver additional feasibility study and other business consultancy services to the combined BDO LLP Company’s current and future customers (Habib, 2011). With more clients, the combined BDO LLP Company generates higher revenues (Gibson, 2012). With higher revenues, the company generates higher net profits (Scott, 2011). Likewise, the increase in the number of employees reduces the fixed costs. The reduction in fixed costs increases the company’s after tax net profits. With higher profits, the company can increase the salaries and other fringe benefits of its line and staff employees. Further, the merger and consolidations generate additional funds for project expansions. The excess funds of one combining company can be used to fund the expansion and other investment activities of the other company or companies. Consequently, BDO LLP’s excess cash can be funneled to set up a new PKF LLP’s new branch. Clearly, mergers and consolidations increase investment opportunities, especially for the merger between BDO LLP and PKF LLP. Conclusion Several companies entered into timely mergers and consolidations. The mergers and consolidations increased the combined companies’ physical presence and power. The current research shows the intricacies of the BDO LLP and PKF LLP merger. Clearly, mergers and consolidations, especially the BDO LLP and PKF LLP merger, spawn profitable synergies. References: Belkaoui, A., 2004. Accounting Theory. London: Cengage Learning Press. Bruner, R., 2011. Applied Mergers and Acquisitions . London: J. Wiley & Sons Press. Carney, W., 2009. Mergers and Acquisitions. London: Wolters. Casson, M., 2012. Multinationals and World Trade. London: Routledge Press. Davies, S., 2008. Mergers and Merger Remedies. London: Edward Elgar Press. Faulkner, D., 2012. The Handbook of Mergers and Acquisitions. London: University Press. Galpin, T., 2010. The Complete Guide to Mergers and Acquisitions. London: J. Wiley & Sons. Gaughan, P., 2005. Mergers: What Can Go Wrong and How to Prevent it. London: J. Wiley & Sons. Gibson, C., 2012. Financial Reporting and Analysis. London: Cengage Learning. Habib, M., 2011. Feasibility Study - Marketing, Financial and Operational Analysis. London: Lambert Press. Ittelson, T., 2009. Financial Statements . London: Career Press. Karenfort, S., 2011. Synergy in Mergers and Aquisitions. London: Books on Demand Press. Latash, M., 2008. Synergy. London: University Press. Manjunath, V., 2010. Entrepreneurship and Management. London: Pearson Press. Munsaka, T., 2013. The Importance of Project Feasibility Study. London: Grin Press. Otto, M., 2009. Feasibility Study and Future Projections. London: Diplomica Press. Pattison, B., 2009. Synergy. London: Jett Black Press. PKF., 2011, PKF International Network now Ranked 10th in the World. 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