MBA515 Managerial Accounting

We will conduct a quantitative analysis for the company Monsanto (Round up) and Bayer , which has a directional strategy focused on expanding the company through horizontal integration. The company does a great job keeping close watch on its cash position and consistently maintains a positive cash flow; is very solvent; controls its overhead expenses; has solid marketing and sales, production, and human resources performance metrics, and fosters a culture of strategic thinkers. Historically, your company has expanded through a combination of organic (new startups) and inorganic growth and feels it’s time to consider acquisition opportunities.

In this project, the Board is looking to engage in a friendly acquisition of a company that will not only increase its market share, but allow it to penetrate new markets and increase the company’s abilities to meet current and future consumer needs and expectations. Since management’s attitude is to pursue a friendly acquisition as opposed to a hostile takeover, your team may consider looking at conglomerates that have experienced significant growth through inorganic growth (acquisitions) and may now be looking to refocus on their core business and are willing to consider divesting some of its businesses that are within your industry.

There could be other companies that are under financial duress and receptive to acquisition offers. Your team is a part of the corporate mergers and acquisition (M&A) department and has been assigned the task of identifying two potential acquisition targets. Since your Board is committed to a strategy of horizontally integration, you will be looking for possible acquisitions from within your industry. You are aware that the Board strategizes and supports green technology in companies that are guided by core values. You will be performing a preliminary analysis of the companies under consideration, and then ultimately recommend one of the companies move forward for a more in-depth valuation by M&A Department.

Conduct Quantitative Analyses of the Companies (financial)

Present a comprehensive financial statement analysis of the target acquisitions. Prepare the common size statements and all the ratios and amounts for the measures given below for the most recent year for both of your companies and present in a clear tabular form. Then discuss each category given below.

Prepare common-size financial statements for both target acquisitions

Complete both a horizontal and vertical analysis for each target acquisition

Compare the common-size financial statements between the two companies using cross-sectional analysis

Calculate and interpret relevant profitability, solvency, liquidity, leverage, market value ratios for each company that will be useful in comparing the target acquisition

For each company , graphically trend the net income and cash flow from operations over the last five years. Based on a comparison of the income statement to the statement of cash flows, what accounts explain the greatest differences between net income (loss) and cash flow from operations. Comment on the quality of the earnings numbers.

Calculate and interpret the net present value (NPV) of the companies’ annual free cash flow (FCF) for a 5 year period (NPER) taking into account a constant growth rate (which will need to be calculated), and a discount rate that is equal to your companies weighted average cost of capital (WACC), which is 7%.