Merger-acquisition in morocco

Merger-acquisition, is a process by which one company merges with or acquires another

company. This process is often used to achieve strategic objectives such as geographic expansion,
acquisition of key technologies or skills, cost reduction, or industry consolidation.The merger-
acquisition process involves two or more companies deciding to merge to form a single entity. In
Morocco, this process is regulated by law and involves several important steps.

in Morocco, there have been several examples of mergers and acquisitions over the years. Here are
some examples:

1-The merger between BMCE Bank and Banque Internationale Arabe du Maroc (BIAM) in 2009 to
form the BMCE Bank Group.

2-The acquisition by telecom operator Maroc Telecom of Gabon Telecom in 2007, followed by the
acquisition of subsidiary Togo Telecom in 2008.

3-The acquisition of water distribution company Veolia Maroc by the National Office of Electricity and
Drinking Water (ONEE) in 2019.

4-The merger in 2016 between cement companies Lafarge and Holcim to form LafargeHolcim Maroc.

5-The acquisition by Moroccan real estate group Alliances of Polish company Polnord in 2021.

Overall, merger acquisition is an important tool for Moroccan companies looking to grow and expand
their operations, and by following the necessary legal and regulatory steps, they can ensure that the
process is both legal and beneficial to all parties involved.

The steps of a merger and acquisition process are as follows:

1. Pre-merger stage:

 Valuation of assets and liabilities of the target company

 Disclosure of contingencies and provisions in the financial statements

2. Merger stage:

 Recording of the purchase price paid for the target company

 Recognition of goodwill or bargain purchase gain

3. Post-merger stage:

 Elimination of inter-company transactions and balances

 Adjustments for fair value changes of assets and liabilities

 EXEMPLES:

ABC Ltd acquired 100% shares of FALI on 1 January 2022 for a purchase price of 500,000 DH. The
assets and liabilities of XYZ Ltd at the date of acquisition were as follows:

Assets:

Cash: 50,000 DH

Accounts receivable: 100,000 DH

Inventory: 150,000 DH

Property, plant and equipment: 300,000 DH

Total assets: 600,000 DH

Liabilities:

Accounts payable: 50,000 DH

Bank loan: 100,000 DH

Total liabilities: 150,000DH

1. Recording of purchase price:

INVESTEMENT IN FALI (fair value of net assets 500000

acquired)
PURCHASE CONSIDERATION PAID 500000
Debit credit

2. Recognition of goodwill:

debit credit

GODWILL 100000
INVESTEMENT 100000

°(500,000 - 400,000 = 100,000)

3.Revaluation of assets and liabilities to fair value:

INVENTORY 50000
 Gain on revaluation of inventory 50000

Property, plant and equipment 100000

Gain on revaluation of property 100000

°(150,000 x 1/3 = 50,000 and 300,000 x 1/3 = 100,000)µ

4.Amortization of goodwill:

Amortization expense 20000

Goodwill 20000

°(100,000 / 5 = 20,000)

5.Consolidation of financial statements:

Debit credit

Investment 600000
Liabilities 150000
Retained earnings 250000
Goodwill 100000
Assets 600000
nvestment 150000
INVESTMENT 250000
Equity 100000

APPLICATIONS:
Company A acquired 100% of the shares of Company B for a total consideration of 50,000,000 MAD.
The balance sheets of both companies before the acquisition were as follows:
Company A Company B
Assets: Assets:

Property, plant and equipment: 30,000,000 MAD Property, plant and equipment: 20,000,000 MAD

Inventory: 10,000,000 MAD Inventory: 8,000,000 MAD

Accounts receivable: 5,000,000 MAD Accounts receivable: 3,000,000 MAD

Cash and cash equivalents: 2,000,000 MAD Cash and cash equivalents: 1,000,000 MAD

Liabilities: Liabilities:

Shareholders' equity: 40,000,000 MAD Shareholders' equity: 15,000,000 MAD

Accounts payable: 5,000,000 MAD Accounts payable: 5,000,000 MAD

Other liabilities: 2,000,000 MAD Other liabilities: 2,000,000 MAD

After the acquisition, Company B was merged with Company A and the consolidated balance sheet is
as follows:

Company C
Assets:
Property, plant and equipment: 50,000,000 MAD
Inventory: 18,000,000 MAD
Accounts receivable: 8,000,000 MAD
Cash and cash equivalents: 3,000,000 MAD
Liabilities:
Shareholders' equity: 55,000,000 MAD
Accounts payable: 10,000,000 MAD
Other liabilities: 4,000,000 MAD
Questions:

1-What is the goodwill amount resulting from the acquisition?

2-Prepare the journal entries for the acquisition.

3-Prepare the journal entries for the merger.

1-The amount resulting from the acquisition is 22,000,000 MAD.

(50,000,000 MAD - 26,000,000 MAD = 22,000,000 MAD).

2-Journal Entries for Acquisition:

Property, plant and equipment 20,000,000

Inventory 8,000,000
Accounts receivable 3,000,000
Cash and cash equivalents 1,000,000
Shareholders' equity (Company 15,000,000
B)
Accounts payable 5,000,000
Other liabilities 2,000,000
Cash 50,000,000

3-Journal Entries for Merger

Property, plant and equipment 20,000,000

Inventory 8,000,000
Accounts receivable 3,000,000
Cash and cash equivalents 1,000,000
Shareholders' equity (Company B) 15,000,000
Property, plant and equipment 30,000,000
Inventory 10,000,000
Accounts receivable 5,000,000
Cash and cash equivalents 2,000,000
Shareholders' equity (Company A) 40,000,000
Accounts payable 5,000,000
Other liabilities 2,000,000

Preparer par: wissal tayaa.