You are the CFO of your organization where you will be deciding between three choices of consolidation. This assignment will ask you to select a choice that best supports short and long-term goals of common stock of a company compared to two choices with minority interests. All three choices represent control and significant influence over the subsidiary. In the below scenario, you are tasked with integrating the merger between two companies. You will select two companies from the same industry on the NASDAQ stock exchange. One will be the parent company while the other will be the subsidiary.
Scenario
You have three choices, any of which you believe that the board of directors will support:
Choice 1: Your company acquires 80% percent of the common stock of the target company with a minority interest of 20%.
Choice 2: Your company acquires 70% percent of the common stock of the target company with a minority interest of 30%.
Choice 3: Your company acquires 100% percent of the common stock of the target company.
Instructions
Write a 4–5 page paper in which you:
Assume the role of the CFO who has been tasked with integrating the merger between the two companies. Introduce these two NASDAQ companies, explaining pertinent background information.
Explain the manner in which the acquisition fits into your company’s operational and strategic directions.
Select two choices provided in the scenario and compare the key accounting requirements for each of the selected choices.
One of the selected choices will be presented to the CEO and Board of Directors. The BOD will ask which method will provide substantial company growth in the next three years. Explain why your choice is the best forward-facing company goals for the company.
Identify and explain at least three possible strengths, business threats, and ways to mitigate those threats as a result of the proposed acquisition choice made.
