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Managing International Acquisitions Essay

1010 words - 4 pages

An acquisition is one of the fastest ways for globe business to enhance their reach across the world.Buying a local business can have its advantages, because setting up ones own operations in a new country may take time. It might also prove to be more expensive.However, international acquisitions are more complex than domestic acquisitions because the legal and business environments are different.Assuming that foreign acquisitions of business is permitted, fundamental issues such as identifying the evaluation criteria and evaluating the gain from an acquisition come into the spotlight.This simulation highlights the need to evaluate the right evaluation criteria and accurately analyze the various factors that might influence the evaluation of the gain from an acquisition.In this simulation, one of the world's largest banks called First South Pacific bank (FSPB) with over $400 billion in assets has an extensive network of operations in Americas and Europe.This bank intends to enter the Republic of Kitanesia.Kitanesia has an economy that is growing at a fast rate. FSPB senior management has decided to acquire one of the local banks of Kitanesia.FSPB's strategy is to target the consumer finance and corporate finance segments.Six local banks have been identified as potential targets for acquisition. But we need to identify which banks are the best strategic fits for FSPB and narrow the banks down to three. For this we need to analyze each bank on the following parameters:1. Competitive position of the bank in the market segment2. Assets and liabilities of each bank3. Sectoral exposure4. Network of branches/ATMs5. Product RangeNow we will evaluate the six banks based on the above different evaluation criteria, and rate each bank's strengths on the criteria and identify the top three that have the highest rating. The evaluation will be based on the executive summary on the major banks in the Kitanesian market that prepared by the Corporate Planning Department's research team.The strategic fit was evaluated on two parameters- market strength and financial strength.Three banks have ranked high on both parameters, Eastern Union Bank, Merchant's Savings Bank, and Great Progress Bank. Eastern Union Bank has the highest rating in terms of competitive position. The assets and liabilities position of the bank is also strong. The sectoral exposure of the bank is evenly spread out- a key requirement mentioned by the FSPB's CFO. FSPB's plan was to focus on consumer and corporate banking in Kitanesia. The bank's branches and ATM network is very extensive.In addition, the bank has a very strong product portfolio, a key driver of growth in a competitive market.Now the best three banks have been identified for further evaluation. We must now apply the discounted cash flow (DCF) technique to measure the potential gain from each acquisition, and identify the two...

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