International Finance & Capital Markets Essay Example | Topics and Well Written Essays - 6000 words

International Finance & Capital Markets - Essay Example The company has the desire to acquire China COSCO Holdings Company Limited, which is mainly a logistics and shipping supplier company. The plan for acquisition is evaluated in order to examine whether it will be a success for both the companies. Babcock International had been planning for expansion internationally for the past few years. However, they were targeting the Chinese market in particular. The acquisition plan has been in the negotiation stage and thus there is a need for providing the Board of Directors of Babcock International with recommendations from the financial director regarding the collaboration with COSCO. The cross border acquisition brings a number of issues like the exchange rate risk along with the cross border trade. The plan is evaluated by evaluating the solvency, liquidity and the profitability position of both the companies. The balance sheet of the companies is compared in order to make a decision regarding the collaboration plan. The recent acquisitions of Babcock International are also examined in order to evaluate the strength of the company and get an idea whether it is capable for the acquisition of COSCO. Introduction Babcock International Group PLC is an established company in United Kingdom which is the part of the European Union (EU). The European economy is the world’s largest importer globally in 2011 (16.4%). It is also the largest exporter in the world, exporting 15.4% of all the exports across the globe. Rules and regulations are very strict in EU which possesses restrictions to the companies at different levels of business. Thus it is important for Babcock to obey the rules and regulations of the country and take decision regarding the acquisition China COSCO. The EU also provides investors with a unique market for investment after passing the Markets in Financial Instruments Directive (MiFID) in 2008. Merger and acquisition is viewed as the change agent for any company. The action is taken for expanding or co ntracting the basic operation of the firm which is also known as corporate restructuring. There are different types of acquisition which includes the cross border, local country and home country acquisition. Babcock is panning for cross border acquisition as it is deciding to acquire China COSCO which is leading logistics and shipping Supplier Company in China. The acquisition plan of China COSCO by Babcock will be successful if the following conditions are fulfilled: 1) The creditors and the properties of China COSCO are protected by courts. 2) Babcock has clear knowledge regarding China COSCO. 3) The growth of China COSCO encourages rapid market penetration of China. 4) The entry barriers are considerably high. 5) The cultural difference between UK and China are low. 6) Babcock is relatively larger than size of China COSCO. 7) Babcock has the ability to take the risk of acquisition. 8) Babcock has experience of the local markets of China. 9) Babcock is quite late in entering China market (Clark, 2002) The above conditions are necessary to be fulfilled if the acquisition has to be successful. Babcock has a plan for entering the markets of China for a long time. The proposal of the acquisition is examined by evaluating the financial strengths of both the companies. The benefits of the investors are also concentrated upon. The negotiation