Mallard Case Analysis: An Analysis Of Mergers And Acquisition

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Coyle (2000) defined Mergers and Acquisition (M&A) occur when two or more companies joint together all or part of their operations. The differences between mergers and acquisition relate mainly to the relative size, management control and ownership of the combined business. Mergers is defined as two separate companies pooling their resources into a single entity and become common shareholders. The shareholders of pre-merger companies have a shared in the ownership of the merged business. In contrast, acquisition is defined as where a company or party makes an offer to acquire all the shares or acquire the entire business undertaking by the company. Acquisition is takeover of the ownership and management control of one company by another. Coyle (2000) further explained that control is the key test of the distinction between a mergers or an acquisition.

“Synergies” is the most common arguments for M&A, allowing the
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The cost of equity for Mallard is 12.4% as per below calculation. The valuation of Mallard shares is $20.6675 million which is lower than the offer price $22 million. Dividend valuation model relies on strict assumptions, including a constant expected dividend growth rate. The growth rate estimation is very subjective because the dividend growth rate is based on historical data over 5 years. Mallard’s management decided to dispose of the company, hence it might declare more dividend in recent years in order to boost up the dividend growth.
The valuation in this question for Mallard is 12.4% as compared with the earnings yield 19.2%. Dividend can be set by management or shareholders within the constraints of sufficient earnings and reserves. It might not be appropriate to value the company based on discounted value of future dividend

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