Mergers and aqcuisition Essay Example | Topics and Well Written Essays - 2750 words

Mergers and aqcuisition - Essay ExampleSince Bentley has somehow gained fame after operating with eleven stores in Southern Europe, Zetas should look for 24-year AA bonds to determine the discount range. Judging by the present status of Bentley in the Southern European market, the discount rate Zetas should use to quantify the value of Bentley for their equity holders should put from 5.0%-5.25%. At this low discount rate, they generally have a much shorter period concerning their liabilities. Furthermore, a discount rate of that range is competitive enough to acquire Bentley if Zetas other competitors for Bentley acquisition uses a higher discount rate. Zetas also have the advantage since they have operated for years and gained patronization from retail stores in London and Newcastle. Thus, using a lower discount rate to assess the Bentleys is a safe way for their excess cash. By doing so, Zetas is being prudent enough. If they scratch the bond rate, Bentley equity holders would actually overview it down for prudence. Apparently, it is quite difficult to get a good AA measure for acquisition and bond yields. Markova (2001) states that if a compevery uses a discount rate of such range, the competitors tend to overlook the rate and thus t discourages them to continue bidding.Terminal value is defined as the value of any item at the end of a particular time phase. For instance, the terminal value may include the value of a fully depreciated asset and the maturity date value of a bond (Bergstein, 1998). Based on the Table 1 of Mr. Sharpe, the terminal value is 8.5 million. The terminal value that should be used in show to evaluate the cash flow of Bentley is satisfactory enough for Zetas to gain full acquisition to it, which has principally been driven by the market. Since Bentley has somehow gained fame after operating with eleven stores in Southern Europe, Zetas should look for 24-year AA bond. At this terminal value, they generally have a much shorter per iod concerning meeting the demands of their liabilities. Furthermore, a Bentleys terminal value for 2005 which is judge to grow by 5% in 2006 is competitive enough to acquire Bentley if Zetas other competitors for Bentley acquisition uses fashion retail items using their own names. Since Zetas is just intend to start using its own name, Zetas have the advantage since they have operated for years and gained patronization from retail stores in London and Newcastle. Thus, using a lower discount rate to assess the Bentleys is a safe way for their excess cash. By doing so, Zetas is being prudent enough. If they take the bond rate, Bentley equity holders would actually overview it down for prudence. Collateral, which consists of securities that could be interchange by the Reserve Bank if the borrower fails to pay back the loan, limits the Feds (and therefore the taxpaying publics) risk exposure. Acceptable collateral includes, among other things, U.S. Treasury securities, government ag ency securities, municipal securities, mortgages on one- to four-family dwellings, and short-term commercial notes. Usually, collateral is kept at the Reserve Bank,