Wednesday, April 3, 2019

Dixons Takeover of Elkjøp

Dixons Takeover of ElkjpThe concord takeover of Elkjp by DixonsContents (Jump to)AbstractChapter 2 lit ReviewChapter 3 Sources of DataChapter 4 Research Design, and statistical summaryChapter 5 ConclusionBibliographyAbstractThe situations and responsibilities of the room of layors, chief Operating Officer, or Managing Director, Chief Financial Officer and the remainder of velocity counseling of a listed company, as stated by Jayne Mammatt, Senior Manager at Ernst and Young, throw off become increasingly onerous in recent years (Ernst Young, 2006). The describe purpose of the Board of Directors is to ensure the prosperity of a company by directing the companys affairs whilst meeting the appropriate interests of its sh atomic twist 18owners (BREFI group, 2006). The role of the Board of Directors is to (BREFI group, 2006)Establish vision, mission and honours,Set scheme and structure,Delegate to management, and usance accountability to shareowners and be respo nsible to relevant involvementholders.The foregoing assertion bears ill-tempered relevance concerning the subject of the attainment of Elkjp by Dixons and whether tell attainment will im urge onion in a gain in shareholder riches. The gesture posed as to the fact that there is examine that national scholarships do not lead to shareholder wealth gains is borne out in studies conducted by Doukas and Travlos (1988, pp. 1161-1175) and Markides and Ittner (1994, pp. 343-366). Thus, in the case of the eruditeness of Elkjp by Dixons the question to be examined is, if there is any undercoat to suppose that a cross-border eruditeness would be different in terms of leading to shareholder wealth gains?Dixons is one of the monolithicst retailers of electronic products in the Europe, operating in over 12 countries (DSG transnational plc, 2006a). The company, Dixons Group plc, is boonly known as DSG International (UK traffic Park, 1999), however it shall be referred to as Dixon s in this examination. The company operates in the sideline sectors under a number of brand names which the company has acquired or set up operations under its own brand (DSG International plc, 2006b)ElectricalsCurrysElectro manhoodElkjpKotsovolosPartmaster DirectUniEuroDSG Insurance ServicesComputingDSG fear ServicesGenesisPC CityPC WorldPC World railway lineThe TechGuyse-commerceDixons.co.ukPixmania.comThe company earned 7,072,000,000 during 1005 2006 and generated 317,600,000 in kale earlier tax (DSG International plc, 2006). Elkjp ASA is the largest wholesale and retail seller of electronic equipment in the Nordic Region with outlets located in Norway, Sweden and Denmark ( commercial enterprise.com, 2006) generating approximately 475 cardinal in sales in 1999 (Dixons Group plc, 2000/02, p. 3). Dixons has been an encyclopaedism minded company, utilizing this technique to expand into current markets as sound as broaden its hateful of operations in the similar mode as Wal-Mart which utilizes the buy in approach to enter markets as opposed to setting up new operations from scratch. The foregoing is evidenced by its acquisition of ASDA in the unify Kingdom and planned acquisition of Taiwanese retail Trust-Mart in mainland China (Barboza and Barbaro, 2006). In 1999 Dixons acquired the Norwegian electrical retailer Elkjp for 444 trillion to confirm a significant foothold in the markets of Denmark, Norway and Sweden, as well as a platform for the launch of other branded stores in its portfolio (UK Business Park, 1999). The expansion represents a long standing policy of the company which has acquired (UK Business Park, 1999)1996, DN Computer Services, a mail order computer company for 9.7 one thousand jillion1998, Byte, a computer retailing business acquired from Specialist Computer Holdings for 7 gazillion to add its 16 outlets to the chain of 50 PC World stores1999, a chain of 39 electronic retail stores from Seeboard for 20 million1998, a venture in with Planet Online to aid in meshwork computer sales1999, an investment in U.S. pocketbookd Telepost Holdings for 6 million to expand its Internet based business serve ups1999, acquisition of Elkjp for 444 million2000, acquisition of Ei System Computer in Spain for 16 million to add 12 stores to its business line2000, a 15% stake in Greek electronics retailer P. Kotsovolos for 44 million2001, the acquisition of the Danish company SuperRadio, a chain of electronics superstores2001, the acquisition of a 24% stake in the Italian electrical retailer UniEuro for 64 million,2002, the acquisition of Direct Telephone Services, a mobile phone provider for 31 million2002, the acquisition of the remaining shares of UniEuros 88 stores for an additional 231 million2004, the acquisition of WHSU, known as Micro Warehouse, to expand its PC World operations2005, Dixons changed its name to DSG InternationalThe indicated deals point to the management strategy of expansion through acqui sition as a long term business plan, of which Elkjp was another link in that process.This examination shall seek to examine the statement as to whether the instance of the cross border acquisition of Elkjp by Dixons has lead to a gain in shareholder wealth in light of the statement that there is a sufficient body of evidence in domestic acquisitions that such transactions do not, in to the highest degree instances, lead to gains in this area. The foregoing question shall be examined through explore conducted into the pre and post merger standings of Dixons, as well as other indicators of shareholder places as represented by depot outlays, assets, and revenue growth. As stated by Broxterman and Murad (1999, p. 3) the objective and concern of the Board of Directors and Chief executive director Officer and upper management staff is to make up shareholder value. They state that this is measurable through the following means (Broxterman and Murad (1999, p. 3)Return on Capital Inv ested, or EVA (stinting abide by Added)This term has become a touristed metric that measures the trend of an improvement or a decline in shareholder value, and in the instance of public companies this is reflected in the stock price. Accordingly, an increase in shareholder value moves stock prices upward, whereas a decline in this metric sends them downward.Groves (2006) states that in simple terms, a company increases shareholder value through either a reduction in its cost base whilst maintaining revenue and or through increasing its revenue whilst maintaining or lessen its cost base. Bierman (2006, pp. 1-2) makes the same argument, stating that Business corporations attempt to make profits and increase the value of the stockholders position. These theories apply to acquisition activity as well, as these transactions represent a view of corporate strategy to expand their operations and to increase their profit Rappaport, 1997, pp. 14-29). much(prenominal) can also result, increase profits, from economies of scale, which is the reduction of duplicate operations that consequently lowers costs in administration, warehousing, manufacturing, delivery, supply chains and allied functions. Utilizing the foregoing as a guide, research into these aspects will provide definitive study to stand for whether an acquisition has met these conditions as indicated above.Dixons management strategies choose functioned in much the same manner as the fabled John F. Welch, Jr., the former Chairman and Chief Executive Officer of General Electric during their storied years in that Who knows what theyll buy or sell next? (Higgins, 2000, p. 10). This illustration has been utilized because betwixt 1987 and 1988 General Electrics return on shareholders equity increased from 17.6 percent in 1986 to 18.5 percent in 1987 and to 19.4 percent in 1888 (Higgins, 2000, p. 9). what is more the companys balance sheet and cash flow remained toughened during this period (Higgins, 2000, p. 9). Despite the foregoing the companys share price did not reflect this performance as a result of the experience of outsiders (Higgins, 2000, p. 9). The foresight of Welsh and General Electric was acknowledged nearly a decade later when Noel Tichy, a corporate analyst said The deuce greatest corporate leaders of this century are Alfred Sloan of General Motors and scalawag Welsh of GE (Higgins, 2000, p. 10). The preceding represents the spirit of the examination of Dixons, in that their acquisition minded strategy is seemingly challenged in the same manner.Chapter 2 literature ReviewIn researching the subject as to whether there is any reason to believe that the cross border acquisition, as represented by Dixons of Elkjp, should or does represent a difference between domestic acquisitions which by and large pull in proven not to lead to an increase in shareholder wealth, there is evidence to prove such is not necessarily the case. Jarrel and Poulsen (1889, pp. 12-19 ) yield the analysis that domestic acquisitions do not generally lead to shareholder increases in their analysis as reported in The Returns to Acquiring Firms in Tender Offers Evidence from Three Decades., as does Loder and Martin (1990, pp. 17-33) in incarnate Acquisitions by Listed Firms The Experience of a Comprehensive Sample. Doukas and Travlos (1988, pp. 1161-1175) in The Effects of Corporate Multinationalism on stockholders Wealth, Markides and Ittners (1994, pp. 343-366) Shareholder Benefits from Corporate International variegation as well as Yeung and Morck (1992, pp. 41-56) in internationalisation An Event carry Test point to evidence that companies in comparison achieved better result from foreign acquisitions. The preceding authors explain the improved results concerning gains as being a factor of market synergies.A review of the annual Reports of Dixons and Elkjp for the periods between 1999 through 2005-2006 represented a key source of direct instruction concern ing the earnings of the firms which in term could be cor cogitate against the stock prices for said periods. As stated by Higgins (2000, p. 9) in his book Best Practices in Global Investor Relations The Creation of Shareholder Value, the activity registered by stock prices might not accurately reflect the performance of the company, however, the preceding analogy referred to the inception of diversified merger and acquisition strategy in the 1980s by Jack Welsh of General Electric, whose principle are understood now.Chapter 3 Sources of DataIn equate whether Dixons management strategy in the acquisition of Elkjp has added to shareholder value, the analysis of a number of sources shall be utilized to bring forth data to enable a determination to be pureeed. Past history as represented in the yearbook Reports for both companies represents the most relevant data concerning revenues, profit and related data. Internet sources present the opportunity to examine stock prices from a pre sent day and historical basis to correlate against the revenue result achieved in various years to reach a determination of the preceding in generating shareholder wealth.The utilization of books and journal articles represent sources that will aid in reviewing theory as well as foundational and theoretical learning on shareholder wealth as well as the duties and responsibilities of the Board of Directors and upper management in this regard. Internet sources represent the means to seek information not only on theoretical aspects as mentioned previously, but information on company activities as reported in various newspapers and press releases. The combinations of these sources will permit a balanced view as to equating the examination of the question, thus all shall be utilized.Chapter 4 Research Design, and Statistical AnalysisThe design of the research is to present the factual accounting and stock share price data as the conclusive means via which to reach a determination as to if the acquisition of Elkjp by Dixons has or has not resulted in gains to shareholder wealth. This approach has been taken as a result of studies and information as provided by Doukas and Travlos (1988, pp. 1161-1175) and Markides and Ittner (1994, pp. 343-366) on international acquisitions, as well as the internet source of BREFI (2006) that outlined the roll of the Board of Directors, along with Broxterman and Murads (1999, p. 3) insights into return on capital invested, or EVA (Economic Value Added).The summary of financial activity with respect to Dixons acquisition of Elkjp is contained in the following TableTable 1 Dixons Acquisition of ElkjpFinancial Summary 1998 through 2006(in millions)(Dixons Annual Reports, 1999 through 2005/06)The foregoing statistical figures have been compiled in keeping with the stated aims and objectives of this examination as well as to present the actual results of operations. This Table effectively indicates that Dixons share prices have increas ed since its acquisition of Elkjp, as have revenues.Chapter 5 ConclusionDixons acquisition of Elkjob represents one of a string of acquisitions performed by the company since 1999. Elkjps revenues during the period 2004/05 were 1,003m (Dixons, 2004/05) with 2005/06 sales registering in excess of 1,500m (contentmanager.net, 2006). Considering that Dixsons paid 444 for Elkjp in 1999, the earnings clearly indicate that Dixons has received more than its moneys worth in return.The stock price and revenues figures clearly prove that in this instance Elkjps as well as Dixons shareholders have benefited from this acquisition, as well as the other acquisitions and company actions since 1999. Given that Economic Value Added, as stated by Broxterman and Murad (1999, p. 3) is the key determinant of shareholder vale, Dixons has demonstrated that their concern for shareholder value has been met. The dramatic gains made by the company are a result of its overall approach to management of the firm s resources, as well as continued expansion and growth. These principles have boded well for Elkjps shareholders, as well as Dixons.BibliographyBarboza, D., Barbaro, M. (2006) Wal-Mart said to be acquiring chain in China. 16 October 2006. The immature York TimesBierman, H. (2006) Increasing Shareholder Value. Springer PublicationsBREFI group (2006) The Board of Directors roles and responsibilities. Retrieved ion 22 November 2006 from http//www.brefigroup.co.uk/resources/board_roles.htmlBroxterman, W., Murad, D. (1999) Enhancing Shareholder Value. 23 September 1999. FEICA 1999 Conference, Lucerne, SwitzerlandBusiness.com (2006) Elkjp Asa. Retrieved on 22 November 2006 from http//www.business.com/directory/retail_and_consumer_services/consumer_electronics/Elkjp_asa/ write/CNN Money (1999) Freeserve IPO Get on line. 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(1988) The Effects of Corporate Multinationlism on Shareholders Wealth Evidence from International Acquisitions. Vol. 43. Journal of FinanceDSG International plc (2006) Annual Report and Accounts 2005/06. Retrieved on 22 November 2006 from http//w ww.dsgiplc.com/Uploads/b1ce5112-673c-45f2-a4cd-989bab7feda2/fv ar0506.pdfDGS international plc (2006) Our Brands. Retrieved on 22 November 2006 from http//www.dsgiplc.com/Layout.aspx?CatID=9c8bcdca-948a-44e5-b7a7-60bd761d7017ID=7df99862-91cb-490d-ad89-38ac1764e880DSG international plc (2006a) Our History. Retrieved on 22 November 2006 from http//www.dsgiplc.com/layout.aspx?ID=6568d063-24f8-4c3d-a7b7-6aa675e64775CatID=86e81cbe-a91d-4490-8726-5d37e765e6c2Ernest Young (2006) Ernst Young Launches Company Directors Handbook. 24 March 2004. Retrieved on 22 November 2006 from http//www.ey.com/global/content.nsf/South_Africa/Governance__Sustainability_-_Company_DirectorsGoogle (2006) DSG International plc. Retrieved on 25 November 2006 from http//google.com/finance?cid=3785532Groves, J. (2006) Maximizing Shareholder Value. Retrieved on 24 November 2006 from http//www.captive.com/service/marsh/shareholder_value.htmlHiggins, R. (2000) Best Practices in Global Investor Relations The Creation of Shareholder Value. Quorum BooksJarrell, G., Poulsen, A. (1989) The Returns to Acquiring Firms in Tender Offers Evidence from Three Decades. Vol. 18. Financial attentionLoderer, C., Martin, K. (1990) Corporate Acquisitions by Listed Firms The Experience of a Comprehensive Sample. Vol. 19. Financial prudenceMarkides, C., Ittner, C. (1994) Shareholder Benefits from Corporate International Diversification Evidence from U.S. International Acquisitions. Vol. 25, matter 2. Journal of International Business StudiesRappaport, A. (1997) Creating Shareholder Value A put across for Managers and Investors. Free PressUK Business Park (1999) Dixons. Retrieved on 23 November 2006 from http//www.ukbusinesspark.co.uk/dixonsaa.htmVNU mesh (2006) EB Beats Dixons to make bid for Game. Retrieved on 25 November 2006 from http//www.vnunet.com/articles/print/2005144Yeung, B., Morck, R. (1992) Internationalization An Event Study Test. August 1992. Journal of International Economics

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