In a downturn economy such as what we may be experiencing, company on a higher financial platform often seeks to acquire potential profitable businesses within the next 3-5 years.
Recent cases are as follow:
Information from the Star, 5 May 2008
Apex (Pharmaceutical)
In 1962, Apex started as a retail wholesale pharmacy. Six years later it started pharmaceutical manufacturing
Currently, Apex Healthcare Berhad is strategising to become pharmaceutical and consumer healthcare product-based company which owns the rights and intellectual property of brands.
To achieve this end, the latest corporate exercise undertaken is to invest RM 292,000 in Singapore’s Chastal Marketing, which has the rights to 12 countries for 3 products – lozenges, mints and condoms, that went on sale in Malaysia. Chastal is expected to contribute to Apex’s group earnings from 2009 onwards.
Reasons for Acquisition:
Selling in 6 Countries, Expertise in Mass Market Consumer Marketing, Highly Skilled Team, Help to Increase Sales of Apex’s range of consumer healthcare products.
What are the considerations or information needed to be gathered prior to an Acquisition?
1. Making sense of a purchase: In other words, the purchaser has usefulness for the purchase: a. it can be linked to existing businesses to create better values, higher efficiencies, to complete a product cycle, to reduce total cost or dependencies on suppliers to meet supply needs, or to realise personal ambition or investor’s interest.
2. Calculable rate of returns: Success Transformer Corp Bhd. bought the remaining 40% of Seremban Engineering Sdn. Bhd. (SESB) to make the latter company wholly owned. It is estimated that the Price/Earnings ratio (P/E ratio) was 7.3 times this year. SESB is currently performing much better than internal division and look set to earn a net profit of RM 7.5 million this year.
For example, if a company is currently trading at $40 a share and earnings over the last 12 months were $2 per share, the P/E ratio for the stock would be 20 ($40/$2). (http://www.investopedia.com/terms/p/price-earningsratio.asp)
3. Established brand: Pelikan International Corp Bhd. was in discussion to buy up 80% of Pelikan Colombia Indistri S.A. Buying back to redistribute the same brand managed in various countries where its previous owner was financially strained.
Acquisitions work well if there is a game plan for its usage. And for other consultative units, acquisitions can also be a smart investment. These expert acquirers will often confidently purchase companies at lower-price; rescue or restructure the businesses and then re-sold at a higher price. Definitely not one for the faint-hearted!
Recent cases are as follow:
Information from the Star, 5 May 2008
Apex (Pharmaceutical)
In 1962, Apex started as a retail wholesale pharmacy. Six years later it started pharmaceutical manufacturing
Currently, Apex Healthcare Berhad is strategising to become pharmaceutical and consumer healthcare product-based company which owns the rights and intellectual property of brands.
To achieve this end, the latest corporate exercise undertaken is to invest RM 292,000 in Singapore’s Chastal Marketing, which has the rights to 12 countries for 3 products – lozenges, mints and condoms, that went on sale in Malaysia. Chastal is expected to contribute to Apex’s group earnings from 2009 onwards.
Reasons for Acquisition:
Selling in 6 Countries, Expertise in Mass Market Consumer Marketing, Highly Skilled Team, Help to Increase Sales of Apex’s range of consumer healthcare products.
What are the considerations or information needed to be gathered prior to an Acquisition?
1. Making sense of a purchase: In other words, the purchaser has usefulness for the purchase: a. it can be linked to existing businesses to create better values, higher efficiencies, to complete a product cycle, to reduce total cost or dependencies on suppliers to meet supply needs, or to realise personal ambition or investor’s interest.
2. Calculable rate of returns: Success Transformer Corp Bhd. bought the remaining 40% of Seremban Engineering Sdn. Bhd. (SESB) to make the latter company wholly owned. It is estimated that the Price/Earnings ratio (P/E ratio) was 7.3 times this year. SESB is currently performing much better than internal division and look set to earn a net profit of RM 7.5 million this year.
For example, if a company is currently trading at $40 a share and earnings over the last 12 months were $2 per share, the P/E ratio for the stock would be 20 ($40/$2). (http://www.investopedia.com/terms/p/price-earningsratio.asp)
3. Established brand: Pelikan International Corp Bhd. was in discussion to buy up 80% of Pelikan Colombia Indistri S.A. Buying back to redistribute the same brand managed in various countries where its previous owner was financially strained.
Acquisitions work well if there is a game plan for its usage. And for other consultative units, acquisitions can also be a smart investment. These expert acquirers will often confidently purchase companies at lower-price; rescue or restructure the businesses and then re-sold at a higher price. Definitely not one for the faint-hearted!
