Multinational acquisition

Multinational acquisition

Introduction

In current era mergers and acquisitions (M&A) is a famous strategic option for the business to grow globally, enable growth, diversify into another business, or increase profitability. It is also a fact, the cross boarder merger and acquisition that started in 1980s is consistently been followed until 1990s when financial crisis was at its peak. It is also notable that cross boarder merger and acquisition was increased during the period as it is realized as the important strategic tool for growth of the multinational businesses. It is a fact that there are two or more aspects are related when business acquires a foreign business; determining the value of the business; and identifying the process in which acquisition need to be financed. Among them valuation of the business have more importance when foreign business has to be acquired as there could be significant difference in valuation of business from United States. Also local financing option may have a huge difference as compared to U.S (Buckley, 2002).

In this paper acquisition of Intucell by Cisco is analyzed and accounting difficulties are identified relating to the acquisition.

Discussion

In current era mergers and acquisitions (M&A) is a famous strategic option for the business to grow globally, enable growth, diversify into another business, or increase profitability. On January 23, 2013 Cisco announced to acquire Intucell. Brief detail of Cisco and Intucell (Cisco, 2013; Intucell, n.d.) is discussed later.

Cisco System manufactures, designs and sells networking product based on internet protocol (IP) and other products that are related to IT and communication industry. Cisco also gives services on the products which company manufactures. Majorly the business operates in Canada, US and European markets. Cisco is headquartered in San Jose, California. There are around 71,825 peoples employed in Cisco worldwide. In FY 2011, company reported revenue of USD 43,218 million, which was an increase of around 8% as compared to previous year. But the net profit of the business is decreased by 16.4% as compared to previous year's profit (Cisco Systems, n.d.).

On January 23, 2013 Cisco intended to acquire Intucell for USD 475 mil. Intucell technology with its software Self Optimization Network (SON) assists mobile carriers in optimizing the cellular grid for mobile users or traffic. It is also found with such software it is hard for mobile carriers to optimize their operations in manual way.

There are various issues regarding acquisition that a business faces are as follows:

A joint venture is a contractual business which is commenced with mutual agreement between two or more entities or individuals. Joint venture is more similar to partnership business with one major difference which is in partnership there is an ongoing, long term business relationship, on the other hand joint venture is structured on a single transaction of business. There are various reasons for entering into joint venture; business or individuals enter into joint ventures to share strengths, enhance competitive advantage, and minimize risk in the marketplace. Joint venture could be a business unit which is different from the ...