The Quantitative Analysis Of Synergies In Mergers And Acquisitions

Sichuan Xingguang Power Co.Ltd. (Xingguang Co.Ltd.) is a private enterprise in Liangshan prefecture engaged in power generation and exploitation. During the process of growth and development, it has realized the important influence network companies which have power generating enterprises. On the other hand, Dechang Power Company, which is a state-owned local enterprise, is empowered to operate power networks. However, its development is hindered due to some systematic reasons. According to the requirements Sichuan provincial government puts on state-owned local enterprises' reform, Dechang county government plans to implement the three 100-percent requirement stage by stage, which means that the state-owned enterprises have to be 100 percent multi-ownershipe, the staff's roles have to be 100 percent shifted ,inferior enterprises' state-owned capital has to 100 percent retreat. Thus, it provides an opportunity for Xingguang Co.Ltd. to merge Dechang power company. The main logical construction of the thesis:Based on a thorough research of the target enterprise, Dechang Power Company, the author points out that this mergence project can be realized by purchasing or by annexation. In the following quantitative analysis, the method of cash flow is adopted to analyze the possible ways under each merging mode. Then the author evaluates the value variation generated from the two merging modes. On the base of careful calculation, the author makes a comparison of the coordinative effects under various merging modes and chooses out the merging mode which has better coordinative effects.This thesis consists of four parts:In the first part, the author uses SWOT analyzing method to reveal the current advantages, disadvantages, opportunities and threats Dechang power company faces, and digs into the influence various factors have on the production and operation of the company, the coordinative effect the mergence has on Dechang power company.The second part analyzes the necessity and feasibility of the mergence project. Based on the analysis of merging theory, the third part points out that there are two ways of mergence, purchasing and annexation. This part analyzes how Xingguang company could merge Dechang power company with cash purchasing or assets investment. In the analysis, the method of cash flow is adopted to evaluate the current value of Dechang power company. it also points out the variation of the company's income, cost and taxation. Furthermore, the coordinative effects under cash purchase and fixed assets investment are figured out.The fourth part elaborates the value variation and coordinative effects generated from the two merging modes of cash purchase and assets investment. It also gives a quantitative analysis of post-mergence income variation, cost variation and taxation variation of the enterprise. The fifth part makes a comparison of the reason and greatness of coordinative effects generated from various merging methods, and then it comes to the proposal that Xingguang Co.Ltd merge Dechang power company by assets investment. The major specialties of this thesis are:Ⅰ.During the merging process, companies are usually faced the dilemma of choosing a profit-maximized way. Based on the analysis of the company's income, cost, taxation, financing and interest, this thesis gives a model of deciding a more profitable merging mode by calculating the coordinative effects which offers a quantitative method to estimate the variation of the company's value. Ⅱ.In the choice of the merging mode, assets investment is adopted to take over and combine so that it ensures a minimum taxation on Xingguang Co.Ltd. during the merging process as well as a reduction of intermediary link of flow from power generation to sale. As a result, the overall taxation of the enterprise is reduced; the coordinative effect of mergence is maximized.