Companies’ management of human capital in the merger or acquisition.

Full Answer Section

     

• Company B
  • Background information: Company B is a provider of electronic health records (EHRs). The company has been in business for over 10 years and has a strong customer base. Company B's EHRs are used by a wide range of healthcare organizations, including hospitals, clinics, and physician practices.
  • Reasons for the merger: Company B is seeking to expand its product offerings. The company believes that the merger will allow it to offer a more comprehensive suite of products and services to its customers. Additionally, the company believes that the merger will create cost savings through synergies.

Evaluation of Financial Statements

• Balance sheet
  • The combined company will have a strong balance sheet with a significant amount of assets. The company will also have a moderate amount of debt.
  • The merger will likely result in an increase in goodwill on the combined company's balance sheet. Goodwill is the excess of the purchase price over the fair value of the acquired company's net assets.
• Income statement
  • The combined company is expected to have strong revenue growth. The company is also expected to have synergies that will lead to cost savings.
  • The merger is likely to result in an increase in depreciation and amortization expense on the combined company's income statement. Depreciation and amortization expense is the expense associated with the allocation of the cost of tangible and intangible assets over their useful lives.
• Cash flow statement
  • The combined company is expected to have strong cash flow from operations. The company is also expected to have significant free cash flow.
  • The merger is likely to result in an increase in accounts receivable on the combined company's cash flow statement. Accounts receivable is the amount of money owed to the company by its customers.

Evaluation of Risks

• Potential risks
  • The merger could result in cultural clashes between the two companies.
  • The merger could lead to customer dissatisfaction if the companies are not able to integrate their products and services effectively.
  • The merger could result in antitrust scrutiny from regulators.
• Actual risks
  • The merger did result in some cultural clashes between the two companies.
  • The merger did lead to some customer dissatisfaction.
  • The merger did not result in any antitrust scrutiny from regulators.
• What the companies could have done differently to mitigate risks
  • The companies could have done a better job of communicating with employees about the merger.
  • The companies could have done a better job of planning for the integration of their products and services.
  • The companies could have done a better job of managing customer expectations.

Management of Human Capital

• The companies did a good job of communicating with employees about the merger.
• The companies did a good job of providing training and support to employees during the merger.
• The companies did a good job of retaining key employees after the merger.

Evaluation of Financial Policies

• Capital structure
  • The combined company has a moderate amount of debt. The company's debt-to-equity ratio is 0.5.
  • The company's capital structure is sound.
• Debt
  • The company has a moderate amount of debt. The company's interest coverage ratio is 3.0.
  • The company's debt is manageable.
• Leverage
  • The company's debt-to-EBITDA ratio is 3.0.
  • The company's leverage is moderate.
• Dividend policy
  • The company has a stable dividend policy. The company has paid a dividend for the past 10 years.
  • The company's dividend policy is sound.
• Enterprise risk management
  • The company has a strong enterprise risk management program. The company has a risk committee that is responsible for overseeing the company's risk management activities.
  • The company's enterprise risk management program is sound.

Conclusion The merger of Company A and Company B was a success. The combined company is a leading provider of software solutions for the healthcare industry. The company has a strong financial position and a sound management team.  

Sample Solution

     

Introduction to the Companies

• Company A

  • Background information: Company A is a leading provider of software solutions for the healthcare industry. The company has been in business for over 20 years and has a strong reputation for innovation. Company A has a wide range of products that are used by hospitals, clinics, and other healthcare organizations.
  • Reasons for the merger: Company A is seeking to expand its market share in the healthcare industry. The company believes that the merger will allow it to offer a more comprehensive suite of products and services to its customers. Additionally, the company believes that the merger will create cost savings through synergies.