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Mergers and Acquisitions Assignment Final

Mergers and Acquisitions Assignment Final

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Mergers and Acquisitions Assignment
 
EXECUTIVE SUMMARY
Mergers and acquisitions are one of the popular topics in business today,since they characterize the new economy: pressure of global competition,development of technology and disappearance of country boundaries. Thepurpose of this thesis is to study the valuation processes and approachesin mergers and acquisitions by analyzing the Westpac BankingCorporation/BT Funds Management case. Discounted Cash Flow andComparable Multiples approaches are emphasized in the valuation of thecompanies.Based on the valuation this report will identify the benefits for Westpacacquiring BT Funds Management.The report first introduces the general conditions of merging, in the FundsManagement industry recently and admits that there are some limitationsin the report because the merging is going on now and was hard to collectcomprehensive information.
 
 Management Structure at Westpac
 David Morgan, Chief Executive Officer  Philip Chronican, Chief Financial Officer  David Clarke, Group Executive, BT  Financial Group Leon Davis, Chairman Phil Coffey, Group Executive, Westpac Institutional Bank 
Westpac Banking Corporation
 ASX Code: WBC  Formerly: Bank of New South Wales,01/10/1982. Listing Date: 31/01/1962 Head and Registered Office Level 25, 60 Martin Place, Sydney, NSW, 2000 Internet: www.westpac.com.au Auditor: Pricewaterhouse Coopers
 Principal Activity
The provision of financial services including lending, deposit taking, payments services,investment portfolio management and advice,unit trust and Superannuation fund management,nominee and custodian facilities, insurance, services, consumer finance, leasing, genera finance, foreign exchange dealing and moneymarket services.
 
Introduction
In recent years crashing markets and a stalledeconomic recovery many financial institutions havebeen involved in merging and/or acquiring companiesto increase their market value. Recent examples of Mergers & Acquisitions in Australian financialinstitutions are National Australia Bank acquiring MLC,Commonwealth Bank acquiring Colonial First State andWestpac Banking Corporation over BT FundsManagement; Rothschild; and Hastings.This paper concentrated on the Westpac BankingCorporation (WBC) acquisition of BT FundsManagement from The Principle Office Group (POF).The discussion will incorporate aspects of thetransaction such as market values, synergy, acquisitionprocess, and integration issues.Some of the figures used in this report are obtainedfrom Westpac Banking Organisation. Also the dataused is obtained from the various presentations byPOF and WBC at the time of the acquisition.
Overview of the Funds Management Industry
In recent years due to poor market performance thefunds management industry in Australia has largelysuffered. Due to this investors are more cautious andhave deserted equity-weighted managed funds.This is the reason why a lot of small and big fundmangers have been acquired by large financialinstitutions such as the BIG FOUR BANKS in Australia.$434 million net inflow compared dismally with the$1.2 billion that flowed into managed funds in theDecember 2002 quarter and the $3.1 billion figure forthe March quarter last year.Fund managers have been experiencing an outflow of investors rather then inflow as was the case 8 yearsago, in 1995 when managed funds were theinvestment choice of sophisticated investors.
Acquirer Overview – Westpac BankingCorporation
The Bank was established in 1817 as the Bank of NewSouth Wales, the first bank in Australia. The Bank'sSavings Bank subsidiary was formed in 1955. Thesavings bank was merged with the trading bank on01/10/1993.In 1957, a 40% interest was acquired in the majorfinancier, Australian Guarantee Corporation Ltd (AGC),which was increased to 52.5% during 1972. In 1978,this holding was further increased to 76.8% following athree-for- five share exchange offer. Subsequently in1988, the Bank made a successful bid for all theoutstanding shares in AGC.(C.B.A.).

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