Reference no: EM132584883

(Valuation & Acquisition Analysis)

Alpha Corporation has acquired the Beta Corporation in the start of year 2020. The available information before acquisition for both companies is as follows. Alpha Corporation had current assets of $1.5M, non-current assets of $5M, total liabilities of $3M out of which $1M are of current liabilities and the equity of $3.5M. While, the Beta Corporation had current assets of $0.5, total assets of $3M, and total liabilities of $2 M out of which 50% are non-current liabilities, and the equity of 1M. The Alpha Corporation used its equity to acquire the Beta Corporation at the book value.

Required:

1.Perform the valuation analysis of Beta Corporation using book-value method and determine the ideal price which Alpha Corporation has to pay to Beta Corporation for acquisition.

2. Prepare the balance sheet of Alpha Corporation before acquisition

3. Prepare the new balance sheet of Alpha Corporation after acquisition. Note that Beta Corporation is responsible to pay its liabilities at its own from its equity or the deal price it has received and those will not be added in new balance sheet of Alpha Corporation.

4. The share price of Alpha Corporation before acquisition was $50 while that of Beta Corporation was $30. After acquisition the share price increased to $100. Is there any impact of the synergy? If yes, what is the value?