Assignment Brief

BA (Hons.) International Business & Finance

Academic Year 2019-20
Module Information:
Qualification: BA (Hons.) International Business & Finance

Module Code & Title: BAIBF 10019 Strategic Financial Management

Assignment Title: Individual Report

Component Weighting: 40%

Date of Issue: 6th October 2019 Due date: 12th October 2019, 5 PM

To be filled by the student:

Student ID: 4011BA17

Date of Submission: 12/10/2019

*All work must be submitted on or before the due date. If an extension of time to submit work is required, a Mitigating Circumstance
Form must be submitted.

Has an extension been approved? Yes No

If yes, please provide the new submission date ….…/.…./……., and affix appropriate evidence.

First Marker: Second Marker:

Agreed Mark: Refer: Yes / No

NAME: KIRAN 1
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
General Guidelines
1. A Cover page or title page – You should always attach a title page to your assignment. Use previous page
as your cover sheet and be sure to fill the details correctly.
2. This entire brief should be attached in first before you start answering.
3. All the assignments should be prepared using word processing software.
4. All the assignments should print in A4 sized paper, and make sure to only use one side printing.
5. Allow 1” margin on each side of the paper. But on the left side you will need to leave room for binding.
6. Ensure that your assignment is stapled or secured together in a binder of some sort and send the Softcopy
of your final document to assignment.bahons2016@gmail.com.
7. The submission of your work assessment should be organized and clearly structured.

Word Processing Rules

1. Use a font type that will make easy for your examiner to read. The font size should be 12 point, and should
be in the style of Times New Roman.
2. Use 1.5-line word-processing. Left justify all paragraphs.
3. Ensure that all headings are consistent in terms of size and font style.
4. Use footer function on the word processor to insert Your Student ID, Name, Subject, Module code, and
Page Number on each page. This is useful if individual sheets become detached for any reason.
5. Use word processing application spell check and grammar check function to help edit your assignment.
6. Ensure that your printer’s output is of a good quality and that you have enough ink to print your entire
assignment.

Important Points:
1. Check carefully the hand in date and the instructions given with the assignment. Late submissions will not
be accepted.
2. Ensure that you give yourself enough time to complete the assignment by the due date.
3. Don’t leave things such as printing to the last minute – excuses of this nature will not be accepted for failure
to hand in the work on time.
4. A printed version of the assignment needs to be submitted physically along with a soft copy mailed to the
email mentioned above on or before the stated deadline.
5. You must take responsibility for managing your own time effectively.
6. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply
(in writing) for an extension.
7. Non-submission of work without valid reasons will lead to an automatic REFERRAL. You will then be asked
to complete an alternative assignment.
8. Take great care that if you use other people’s work or ideas in your assignment, you properly reference
them in your text and any bibliography; otherwise you may be guilty of plagiarism.

NAME: KIRAN 2
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 Statement of Originality and Student Declaration

I hereby, declare that I know what plagiarism entails, namely to use another’s work and to present it as
my own without attributing the sources in the correct way. I further understand what it means to copy
another’s work.
1. I know that plagiarism is a punishable offence because it constitutes theft.
2. I understand the plagiarism and copying policy of the University of the West of Scotland.
3. I know what the consequences will be if I plagiaries or copy another’s work in any of the
assignments for this program.
4. I declare therefore that all work presented by me for every aspect of my program, will be my own,
and where I have made use of another’s work, I will attribute the source in the correct way.
5. I acknowledge that the attachment of this document signed or not, constitutes my agreement on
it.
6. I understand that my assignment will not be considered as submitted if this document is not
attached to the attached.

Student’s Signature: …………………………… Date: 12/10/2019

NAME: KIRAN 3
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
TASK 1

What is the difference between merger and acquisition? Why do companies resort to these sort of
measures for growth rather than rely on organic growth? Enumerate the advantages and
disadvantages.

Explain with examples the major methods of business reorganization models that companies
resort to.

“The responsibility of a financial manager is not limited to drawing up and maintenance of

accounts; his responsibility extends to far more than that.” Elaborate.

Word Limit – 2500 words

NAME: KIRAN 4
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 INTRODUCTION
A merger is an agreement that unites two existing companies into one new company. There are
several types of mergers and also several reasons why companies complete mergers. An
acquisition is when one company purchases most or all of another company's shares to gain
control of that company. Purchasing more than 50% of a target firm's stock and other assets
allows the acquirer to make decisions about the newly acquired assets without the approval of
the company’s shareholders. Mergers and acquisitions  are commonly done to expand a
company’s reach, expand into new segments, or gain market share. All of these are done to
increase shareholder value.

Stages involved in any M&A:

Phase 1: Pre-acquisition review: this would include self assessment of the acquiring company
with regards to the need for M&A, ascertain the valuation (undervalued is the key) and chalk out
the growth plan through the target.
Phase 2: Search and screen targets: This would include searching for the possible apt takeover
candidates. This process is mainly to scan for a good strategic fit for the acquiring company.
Phase 3: Investigate and valuation of the target: Once the appropriate company is shortlisted
through primary screening, detailed analysis of the target company has to be done. This is also
referred to as due diligence.
Phase 4: Acquire the target through negotiations: Once the target company is selected, the next
step is to start negotiations to come to consensus for a negotiated merger or a bear hug. This
brings both the companies to agree mutually to the deal for the long term working of the M&A.
Phase 5:Post merger integration: If all the above steps fall in place, there is a formal
announcement of the agreement of merger by both the participating companies.
Mergers & Acquisitions can take place:
• by purchasing assets
• by purchasing common shares
• by exchange of shares for assets
• by exchanging shares for shares

NAME: KIRAN 5
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 DIFFERENCE BETWEEN MERGER AND ACQUISITION

Basis for comparison

between Mergers vs Merger Acquisition
Acquisitions
Definition The merger is a process in which The acquisition is a process in

more than one companies come which one company takes

forward to work as one. control of another company.

Terms Considered to be friendly and Considered to be hostile and

planned. sometimes involuntary (not

always)

Title A new name is given. The acquired company comes

under the name of the acquiring

company.

Scenario Two or more companies that Acquiring company is always

consider each other on equal terms larger than the acquired

usually merge. company.

Power The power-difference is almost nil Acquiring company gets to

between two companies. dictate terms.

NAME: KIRAN 6
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 Stocks Merger leads to new stocks being In acquisition, there are no new

issued. stocks issued.

REASONS FOR MERGER AND ACQUISITION

Companies merge with or acquire other companies for a host of reasons, including:

Increasing capabilities: Increased capabilities may come from expanded research and

development opportunities or more robust manufacturing operations (or any range of core
competencies a company wants to increase). Similarly, companies may want to combine to
leverage costly manufacturing operations .Capability may not just be a particular department; the
capability may come from acquiring a unique technology platform rather than trying to build it.

Gaining a competitive advantage or larger market share: Companies may decide to merge

into order to gain a better distribution or marketing network. A company may want to expand
into different markets where a similar company is already operating rather than start from ground
zero, and so the company may just merge with the other company. This distribution or marketing
network gives both companies a wider customer base practically overnight.
Diversifying products or services: Another reason for merging companies is to complement a
current product or service. Two firms may be able to combine their products or services to gain a
competitive edge over others in the marketplace.

Replacing leadership: In a private company, the company may need to merge or be acquired if
the current owners can’t identify someone within the company to succeed them. The owners may
also wish to cash out to invest their money in something else, such as retirement!

NAME: KIRAN 7
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
Cutting costs: When two companies have similar products or services, combining can create a
large opportunity to reduce costs. When companies merge, frequently they have an opportunity
to combine locations or reduce operating costs by integrating and streamlining support functions.

Surviving: It’s never easy for a company to willingly give up its identity to another company,
but sometimes it is the only option in order for the company to survive. A number of companies
used mergers and acquisitions to grow and survive during the global financial crisis from 2008 to
2012.

DIFFERENCE BETWEEN ORGANIC GROWTH AND MERGER

OR ACQUISITION
In general, growth is considered either organic or inorganic. Organic growth comes from
expanding the organization’s output and by engaging in internal activities that increase revenue.
Inorganic growth comes from mergers, acquisitions, and joint ventures.

PROS OF ORGANIC GROWTH

 Management knows the company inside and out. Since organic growth occurs in a
relatively tighter-knit organization, management knows the company strategies and
operations more intimately than an organization that has recently undergone a merger or
acquisition. This means the company is typically able to adapt to changes in the
marketplace more quickly.
 Less integration challenges and restructuring. During a merger or acquisition, there’s
typically restructuring of personnel and operations that occurs to manage the new volume
of business. This can often mean layoffs, changes in the leadership team, and overall
figuring out how to monitor more employees and assets. During organic growth,
integration challenges or management/personnel changes are typically more gradual,
which can feel more comfortable and natural for the internal culture.

NAME: KIRAN 8
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
  Stay true to your dream. Without mergers or acquisitions, entrepreneurs have more
control over the direction the business is headed.
 It’s more obviously sustainable. Sustainable growth is the ultimate goal of any
company. Without organic growth, there’s no investor interest, little possibility of
becoming an acquisition target, and virtually no chance that the company will become
vibrant enough to sell. Bringing in consistent or growing revenues is a sign that things are
working within an organization and is an important step in business success.

CONS OF ORGANIC GROWTH

 Growth can be significantly slower. Since there’s no infusion of market, product,

assets, or resources, a company growing organically must do so at a sustainable pace.
This means growth can’t overshoot the personnel, support, and resources available.
 May decrease your competitive edge. We all know that the best way to succeed in any
industry is to out-play your competitors. If your competitors are growing quickly or if
your industry has high M&A activity, then growing too slowly can mean you’ll be
quickly overtaken by competitors.
 There is sometimes a glass ceiling. Businesses that rely on organic growth often find
that they lack the resources to continue to grow in a way that allows them to achieve their
goals. As business and customer needs grow, receivables and other cash-consuming items
and resources grow as well.
 Competition drives the market. M&A activity is like dominoes—once companies in an
industry begin merging, it puts the heat on all the other companies to grow more quickly
than is organically possible, or they may be left behind. Competitor’s influx of resources
and business may allow them to lower prices or employ other tactics to steal market
share, making it more difficult for smaller companies in the industry to grow.

NAME: KIRAN 9
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
PROS OF INORGANIC GROWTH

 Growth is much, much faster. Many business nearly double or triple their client list
with a business merger. Since this growth occurs through a transaction, this inorganic
growth is much faster than is possible for organic growth.
 Gain an immediate increase in market share. One of the greatest benefits of a merger
or acquisition is the increase in market share. Through inorganic growth, you are gaining
the benefits of an entire company’s prior sales and relationships, which means you’re
immediately gaining markets and clients that you otherwise may not have had access to.
 Increases knowledge and experience. By combining your company’s forces with those
resources of another company, you are gaining the knowledge and expertise of their key
players. This increased knowledge and experience means you have a stronger roundtable
in making strategic decisions moving forward.
 Create a stronger line of credit. It can be easier to take on debt financing after a merger
or acquisition as some inorganic growth results in a stronger line of credit with the
combined value of the two businesses.
 Gain a competitive edge in the market. Your newfound resources, assets, and market
share, means—if the implementation goes well—you will be a force to be reckoned with
in your industry. You’re setting a new pace for growth that can push you ahead of
competitors and give you a strategic advantage in pricing, purchasing, volume, and
overall reach.

CONS OF INORGANIC GROWTH

 Significant upfront cost. Funding a merger or acquisition usually means a sizable

upfront cost. If your company doesn’t have cash on hand, you’ll likely have to rely on
taking on debt, which can make the merger or acquisition less attractive to investors. If
the integration doesn’t go well, this could also mean a lot of debt that you’re suddenly
unable to pay off.

NAME: KIRAN 10
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
  Management challenges. The sudden growth from a merger or acquisition generates
complexities associated with properly scaling operations such as systems, sales, and
support. Without proper management of growth, a merger or acquisition’s roots won’t be
able to take hold and the integration will ultimately be unsuccessful.
 Financial systems sustainment. There are plenty of operational aspects that an
organization can fumble through inorganic growth. Since finances support all company
actions and is a key for all future growth, not having systems in place that can sustain the
new growth is a huge (and unfortunately common) mistake.

BUSINESS REORGANISATION MODELS

METHODS OF BUSINESS REORGANISATION :
1. Joint Ventures: Joint ventures are new enterprises owned by two or more participants.
They are typically formed for special purposes for a limited duration. It is a combination
of subsets of assets contributed by two (or more) business entities for a specific business
purpose and a limited duration. Each of the venture partners continues to exist as a
separate firm, and the joint venture represents a new business enterprise.

2. Divestures: Divesture is a transaction through which a firm sells a portion of its assets or
a division to another company. It involves selling some of the assets or division for cash
or securities to a third party which is an outsider. Divestiture is a form of contraction for
the selling company. Means of expansion for the purchasing company. It represents the
sale of a segment of a company (assets, a product line, a subsidiary) to a third party for
cash and or securities. Mergers, assets purchase and takeovers lead to expansion in some
way or the other. They are based on the principle of synergy which says 2 + 2 = 5! ,
divestiture on the other hand is based on the principle of “energy” which says 5 – 3 = 3.

NAME: KIRAN 11
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 3. Equity Carve-Out: A transaction in which a parent firm offers some of a subsidiaries
common stock to the general public, to bring in a cash infusion to the parent without loss
of control. In other words equity carve outs are those in which some of a subsidiaries
shares are offered for a sale to the general public, bringing an infusion of cash to the
parent firm without loss of control. Equity carve out is also a means of reducing their
exposure to a riskier line of business and to boost shareholders value.
4. Leveraged Buyout :A buyout is a transaction in which a person, group of people, or
organization buys a company or a controlling share in the stock of a company. Buyouts great and
small occur all over the world on a daily basis. Buyouts can also be negotiated with people or
companies on the outside. For example, a large candy company might buy out smaller candy
companies with the goal of cornering the market more effectively and purchasing new brands
which it can use to increase its customer base. Likewise, a company which makes widgets might
decide to buy a company which makes thingamabobs in order to expand its operations, using an
establishing company as a base rather than trying to start from scratch.

5. Management buyout: In this case, management of the company buys the company, and
they may be joined by employees in the venture. This practice is sometimes questioned
because management can have unfair advantages in negotiations, and could potentially
manipulate the value of the company in order to bring down the purchase price for
themselves. On the other hand, for employees and management, the possibility of being
able to buy out their employers in the future may serve as an incentive to make the
company strong. It occurs when a company’s managers buy or acquire a large part of the
company. The goal of an MBO may be to strengthen the managers’ interest in the success
of the company.
6. Master Limited Partnership: Master Limited Partnerships are a type of limited
partnership in which the shares are publicly traded. The limited partnership interests are
divided into units which are traded as shares of common stock. Shares of ownership are
referred to as units. MLPs generally operate in the natural resource (petroleum and
natural gas extraction and transportation), financial services, and real estate industries.
7. Employees Stock Option Plan (ESOP)

NAME: KIRAN 12
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 An Employee Stock Option is a type of defined contribution benefit plan that buys and
holds stock. ESOP is a qualified, defined contribution, employee benefit plan designed to
invest primarily in the stock of the sponsoring employer. Employee Stock Option’s are
“qualified” in the sense that the ESOP’s sponsoring company, the selling shareholder and
participants receive various tax benefits. With an ESOP, employees never buy or hold the
stock directly.

RESPONSIBILITIES OF FINANCE MANAGER

Roles and Responsibilities of Finance Manager
According to Joseph Massie, “Financial management is the operational activity of a business that
is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”
It is a general assumption that a finance manager works only in the accounts department or he
has to deal with the cash flow. In reality, he has a large number of things to cater to. Also, every
organization, public or private, needs people from the finance background.
What is Finance Management?
In simple terms, finance management is efficient management of funds, planning and organizing
the matters related to money and also effective utilization of economic resources. The basic aim
is maximization of wealth and ensures a fair return to the stakeholders, while maintaining
financial discipline in the organization.
What Does a Finance Manager Do?
 Financial Analysis and Interpretation:
Financial analysis is taking the financial data of the company, organizing it and analyzing
it to find the strengths of the company. This is converted into patterns and a conclusion
will be driven out of it. This helps the higher management to take wise decisions. It also
helps in evaluating the financial health of the company. It is a very tedious task, which
needs to be done articulately.
 Determining the Source of Funds:
NAME: KIRAN 13
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
 A finance manager identifies the sources of funds, especially while starting a new
venture. It involves identifying the lenders and banks that can lend money to the
company. Also, it deals with knowing your customers and target audience.
 Investment of Funds:
A finance manager conducts an in-depth study about the investment that a company
should make and the possible ROI (Return on Investment). He provides a broader
selection of investment opportunities with a lower risk. So a finance manager has to do
risk analysis too.
 Profit Planning and Control:
Profit planning and control involves establishing profit goals, determining the expected
sales volume, estimating expenses, determining profit and much more. After planning
profit successfully, an organization needs to control profit. Profit control involves
measuring the gap between the estimated level and actual level of profit achieved by an
organization.

 Capital Budgeting:
A finance manager determines and evaluates potential expenses or investments that are
large in nature. Such expenditure can be anything like having a new branch office or
investing in a new long-term venture. Apart from these, there are many other important
responsibilities that a finance manager shoulders. One cannot undermine the role of
finance personnel.

REFERENCE

 http://ifeel.edu.in/blog/roles-responsibilities-finance-manager/
 https://www-mbaknol-com.cdn.ampproject.org
 https://www-edupristinecom.cdn.ampproject.org

NAME: KIRAN 14
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT
NAME: KIRAN 15
SUBJECT CODE: BAIBF 10019
SUBJECT NAME: STRATEGIC FINANCIAL MANAGEMENT