Summary Various topics in management accounting

ER based on EARNINGS
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
- No synergies - All synergy benefits to - All synergy – benefits to - Synergy benefits share - Synergy earnings
EPS (t) Target the acquirer proportionally between A proportionally shared ( not
ER= - Calc Max number of shares - Need to calc Min ER ratio and T ( Stipulated %) specified which portion)
EPS(a)
- Earnings for each A is willing to issue - T shareholders don’t want SE
EPS ( t ) +%
shareholder remains the - A shareholders should not to lose i.t.o. earnings. N (t ) -
be in worse position after - If advise the T, need to calc - ER= EPS (t )
same SE ER=
- MV of A shareholders merger the Min ER ratio EPS ( a ) +% EPS (a)
N ( a)
decrease - If advise A, need to - Earnings of both T and A
- MV of T shareholders determine Max ER EPS ( t ) shareholders increase with
ER= - Earnings of both A and T
increase SE shareholders will increase the same %
SE EPS ( a ) +100 %
- We cannot control the MV. EPS ( t ) +100 % N (a)
N (t ) - A shareholders earnings
ER=
EPS (a) increase
- A shareholders earnings - T shareholders earnings
remain the same remain the same.
- T shareholders earnings
increase




STEPS

1. Calculate the ER based on the scenario

2. Calculate the new number of issued shares by A

MERGED EARNINGS(m)
3. Calculate the new EPS post merger - EPS ( m )=
NEW NUMBER ISSUED SHARES