Professional Documents
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Marking guide
Task (a)
My questions are firstly what is the logic in us buying Deuce? I need to be able to understand the
reasons and the drawbacks a bit better.
Task (b)
Also how could we go about buying them and how would we pay for it?
to protect both sides from reputation damage if talks fail and from the
disclosure of sensitive information
Negotiations could establish a price at which the Board of Randolph would sell
Deuce (probably having consulted its major shareholders in advance)
The benefits of this are
o Access to data on Deuce, for example the quality of its earnings, its
resorts, its liabilities and assets, and the likely issues and costs in
integrating the businesses. This helps ensure the price paid is realistic
o Greater chance of success
o Opportunity to plan integration strategy in advance
o Better retention of managerial talent in Deuce, eg to run Deuce in the
immediate post-acquisition period
The drawbacks are
o Potential delay in getting agreement Up to 6
o Directors of Deuce may use negotiations to gain jobs on Dreempark marks for
Board or other (unethical) benefits for themselves (eg facilitation fees, evaluation of
NED positions, consultancy fees in subsequent integration) offer
Share offer
Shares in Dreempark are exchanged for Deuce
Number of shares exchanged implied the value of Deuce
Benefits
o No increase in gearing or debt payments
o Allows Randolph and its shareholders to participate in any business
improvements if they wish (therefore may be cheaper than cash)
Drawbacks
o Changes the nature of shareholders in Dreempark (control, dividend
policy)
o Requires Dreempark to divulge its plans publically to Randolph
shareholders
Alternative structures include share offer with a cash alternative, offer convertible
debt to Randolph and so on.
Maximum Technical skills awarded 15
Integration 3
Total for tasks 33
marks