The real options paradigm entails identifying the strategic options inherent in the
proposed project alongside the project’s forecasted cash flows. The value of these
options is usually missed completely in the standard NPV approach. Accept if real
options greater than cost of initiating the project.❖ MERGER AND ACQUISITIONS
Internal growth comes about when a company invests in products it has developed,
while external growth occurs when a company buys the existing assets of another
company through a merger.
In addition to growth, mergers may allow an organization to diversify.An acquisition is one form of a takeover, which is loosely defined as the transfer of
control of firm from one group of shareholders (Target) to another (Bidder). The
acquiring company can negotiate with management of the other company, which is the
preferred approach, or it can make a tender offer (an offer of cash for shares of stock)
directly to the stockholders of the company it wants to take over. Other forms of
takeovers include Proxy Contests and going private.Acquisitions may occur by either merger (the target is absorbed by the bidder and the
target’s original shareholders receive shares of the bidder). In the case of the Sierra
Leone External Telecommunication (Bidder) and Sierra Leone National
Telecommunication Company (Target) merged as Sierra Leone Telecommunications
company (SIERRATEL) or consolidation (the firm involved become parts of an
entirely new firm, whilst the bidder usually retaining control of the new entity).Other methods of acquisition are stock acquisitions (by cash or tender Offer), and Asset
acquisitions (escaping minority negotiation and liabilities -real or contingent). Some
times Holding companies exist, a holding company holds or own, enough shares (more
than 50%) of common stock to have voting control of one or more other Company’s.
The holding Company comprises a group of businesses, each operating as separate
corporate entity. The holding Company is called the parent, and each Company
controlled is called a subsidiary.