Integrating a Merger between Advanced Micro Devices, Inc. and Analog Devices, Inc.
Business Acquisitions
Overview
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.
Use at least two quality sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.
Business Acquisitions
Student’s Name
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Business Acquisitions
This discussion will evaluate the task of integrating a merger between two NASDAQ Stock Exchange companies; Advanced Micro Devices, Inc. and Analog Devices, Inc., both of which belong to the semiconductor industry. In addition to the introduction of the two companies, their pertinent background information will be explained, followed by an explanation of the way this acquisition integrates into the parent company’s strategic and operational directions and a comparison of the key accounting requirements for two chosen scenarios from the three available choices. Finally, one choice presented to the CEO and Board of Directors will be justified as the one providing the best forward-facing goals for the company, and an explanation of the strengths, business threats, and mitigation of such threats as a result of this choice will be given.
Advanced Micro Devices, Inc.
Advanced Micro Devices, Inc. (AMD) was founded in 1969 and is headquartered in Santa Clara, California. It is involved in the development of high-performance visualization and computing products (Amd.com, n.d.). This company has a market capitalization of $141 billion and the latest share price of $116.78 on the NASDAQ stock exchange as of February 1, 2022. This company whose financial year ends on the last Saturday of December, had, in its latest financial statements, $3.2 billion in net income from revenues of $16.4 billion and diluted earnings per share, EPS of $2.57 (Amd.com, n.d.). Total assets were $12.4 billion, total liabilities were $4.9 billion, and Shareholders’ equity of $7.4 billion. Common Stock shares are 1.2 billion of $12 million. This will be the parent company.
Analog Devices, Inc.
Analog Devices, Inc. (ADI) was founded in 1965 and is based in Wilmington, Massachusetts. It leads in the designing, manufacturing, and marketing of mixed-signal, analog, and digital signal processing (DSP) integrated circuits (ICs) (Analog.com, n.d.). This company has a market capitalization of $86 billion, with $165.37 being the latest share price on the NASDAQ stock exchange as of February 1, 2022. This company whose latest financial year ended on October 30, 2021, had $1.3 billion in net income from revenues of $7.3 billion and an EPS of $3.46 (Analog.com, n.d.). Total assets were $53.2 billion, total liabilities were $14.3 billion, and Shareholders’ equity of $37.9 billion. Common Stock shares are 525 million of $87 million. This company will be the subsidiary.
The Acquisition
The acquisition fits into AMD’s strategic direction to ensure it gains a competitive advantage through product performance and reliability, just like ADI’s strategy that it expects will make a fundamental difference in the customer competitiveness in the selected markets. It fits well into AMD’s operational direction of sustained higher earnings given that ADI’s earnings will be recorded in the consolidated statement of income. The acquisition sits well with the strategic direction of AMD to introduce a variety of prod...