Research paper on recent mnc acquisition Example | Topics and Well Written Essays - 1750 words

On recent mnc acquisition - Research Paper ExampleThe annual sales of Alcon in 2009 was above USD 6.6 single million million million and its operating profit stood everywhere USD 2.2 billion while net income was over USD 1.99 billion. The acquisition of the Alcon will give Novartis the opportunity to expand its portfolio in the eye care segment where on that point is a latent potential for growth due to aging population and globalisation of emerging markets. The feature portfolio of Alcon and Novartis can now tackle a broad range of untapped demands in this segment. The most beta thing to note about the success of this acquisition is the complementary pharmaceutical portfolios of these two companies that filled the gaps surrounded by the back and frontal eye. It also has the chance to gain leverage form its strong global brands in eye lens. Financial impact In April 2008, Novartis and near entered into agreement for Nestles sale of 77% stake in Alcon. It was divided in two s tages stage one required Novartis acquiring 77% majority stake in Alcon from Nestle by paying $168 per share taking the deal to $ 38.7 billion. In this stage Novartis acquired 25% stake in Alcon for $ 10.5 billion. In the second stage, Novartis acquired remaining 52% stake from Nestle for $ 28.4 billion. The majority stake cost Novartis $ 38.69 billion that includes adjustments for interest and dividend. The initial 25% stake was financed by $ 17 billion in cash and $ 13.5 billion was financed by bonds. Remaining $ 8.19 billion was financed by US technical papers. The weighted average external financing cost stood at 2.5% per year as on promenade 2010. With 77% stake in the majority ownership of Alcon, it will consolidate Alcons financial argument into Novartis financial reporting. Preliminary assessment shows that initial 25 % stake in Alcon need to be re- pass judgmentd to its fairish value. Such revaluation will result in $ 200 million gain for Alcon. The additional amortis ation before tax of intangible assets stood at $ 2.2 billion per year. The four month analysis of balance airplane of Alcon in 2010 till April estimates Alcons value at $ 200 million including increased inventory. Over the undermentioned three years after acquisition, the onetime cost to achieve a synergy of approximately USD 199 million is expected to be around $ 139 million including transaction and other charges. bill Requirements for Business Combination Accounting requirements for combination of business requires parent entity to prepare a consolidated financial statement that includes the report of wholly(a) subsidiaries. However, this does not mean that the subsidiaries are excluded from presenting consolidated reports. All items must be accounted for at fair value including investments. In case of shared power as in case of joint ventures, the consent of all parties will be required. For acquisitions, it is extremely important for the acquirer to determine the timing and the nature of acquisition. The profits and losings as a result of intra-firm transactions between Novartis and Alcon including treatment of fixed assets and inventories must be eliminated. The account for contingent asset or liabilities and subsequent adjustment at fair value is also one of the challenging aspects in case of business combinations. Other factors to care of during business combination include pre-acquisition contingencies treatment, interaction of accountancy standards between the acquirer and the acquired, treatment of intangible assets (including goodwill), treatment of risk management, proper disclosures under accounting policies, treatment of