The Risks That UK Coal, an FTSE Listed Company, Can Potentially Face Case Study

The Risks That UK Coal, an FTSE Listed Company, Can Potentially Face In Undertaking Cross-Border Merger and learning (M&A) Activity - Case Study ExampleThe enquiryer states that cross-border mergers and acquisitions are complex undertakings packaged with risks and rewards. When two organizations with different internal controls, management styles, corporate cultures and processes attempt to integrate, the line of commerce risk increases substantially. Before embarking on M&A journey, it is imperative that all risk factors are considered prior to injecting capital in the host country. UK Coal necessitate to conduct due diligence so as to ensure that M&A occupation fits its long-term strategic objectives. Due diligence identifies, confirms or disputes the business reasons for proposed merger or acquisition transactions. Due diligence demands a thorough data analysis of assets and liabilities, particularly large balance sheet items such as accounts receivable, inventory, and accoun ts payable to establish fair market value. It is imperative that a fair value for the business is accurately established so that a reasonable terms is paid for the target assets. A careful analysis of the target companys financial statements avoids incidents of overpaying and mismanaging shareholders expectations. Differences in corporate culture, business practices, and institutional layouts can hinder firms from fully realizing their electromotive force. gibe to a KPMG study, 83 percent of all M&As failed to economically benefit the shareholders and over 50 percent actually destroyed value. A research was conducted involving over 100 senior managers to determine the reason behind this failure which turned out to be the cultural differences. In pursuing a cross-border M&A, it is vital for an organization to assess the political situation prevailing in the target country. This assessment lead not only uncover any potential political risks but also prepare the host company to fac e them and find appropriate solutions for them. Another potential barrier to a successful M&A activity is lack of knowledge about the target company. Knowledge about the company leads to a successful post-merger integration. Another factor that should be interpreted into account is the effects of trade impediments on cross-border M&A. Academic studies lease found that on an aggregate basis, trade costs affect merger activity negatively, though the effect is less pronounced for horizontal mergers, i.e. mergers between firms within the same industry. UK Coal needs to ensure that its target company is one which will lead not only to economical but also intercultural synergies between the two companies. To identify an appropriate acquisition target, aforementioned due diligence should be adequately employed. Moreover, UK Coal needs cognizance in matters relating to exchange rates, local accounting standards, foreign government potential trade regulations, etc. UK Coal should have infor mation regarding its local competitors in the host country and their respective market positions. This will lead to reasonable projections and estimates for the business. Expectations of UK Coal from this activity should be realistic and in parity with the overall strategy formulated at the design stage. Regulatory aspects also need attention to avoid any legal risks. Competent professionals (lawyers, accountants) moldiness be hired to provide financial and legal opinions regarding the merger or acquisition transaction.