Acquisition Project
Business plan for Amazon
The mission and the vision of Amazon involves being the firm that is most customer centric and building a place where customers can find anything that they need to buy through online platform. Through a good customer service is aimed at ensuring continuous high performance of the firm and this should be achieved through personal reviews of products needed, where the customers submit their experience to help other interested customers in making informed decisions before buying the products. By acquisition of Whole Food Company, the company will have ensured the fulfillment of its vision of providing just anything that a customer needs online. Through this the company will be able to extend to the organic food market that has great potential and one that has not been fully exploited. With a growing presence in this market around the world the firm will position itself as a leader globally.
The target market for the company includes people who are 22 years or above and are health conscious, care much about the sustainability of the environment, and their preference includes all- natural food products. The market includes mostly educated people and especially middle and upper-class and who have enough knowledge about the importance of whole food products to their health, their families and the environment. Most of these customers have families and children to whom their share their experience and belief. The target for health-conscious individuals in the middle-class and upper-class is informed by the fact that natural foods are rather more expensive but to target the lower market in the society, the firm aims at providing healthier food options at affordable prices. The lower market to be targeted comprises mainly of students with means providing these products even though more expensive is beneficial to them as well.
The various resources that will advance this acquisition and ensure the success in the market include financial resources, advance technology and large presence in the web, skilled workforce and even strong logistics. The financial resources enable the building of appropriate application that can be useful for customers of natural food products and the establishment of online structure that supports marketing and standardization of customer service online. This will enable Amazon to use technology in gain competitive advantage in the natural food market, acquire large customer base and ensure profitability through the achievement of its mission. As the world market sees the spreading of organic age, the skilled human resource will ensure the company taps into such developments.
Acquisition plan
The main objective of this acquisition includes maximizing of the company’s growth through enhancement of operations in the world market. The specific objectives of the acquisition include building more strength, customer base expansion and venturing into new product segment in the market. The maximization of Amazon’s growth involves increasing revenue by venturing into organic food market with ultimate goal being higher earnings through acquiring of a Whole Food, as a firm that is healthy and has positive holdings. Expansion of customer base involve targeting the market for organic foods with a firm that already has established customers and then through marketing efforts , improved services and affordability increase the market share. By focusing on these objectives the firm will be following on its expansion plans for different product segments and thereby ensure that there is achievement of the main goal which is to provide anything needed by customers. Using technological innovation and infrastructure, the firm will gain a competitive advantage in any market and thence its growth and development strategy.
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Whole Food Income statement |
|||||
|
|
2,018 |
2,019 |
2020 |
2021 |
2022 |
|
Total revenue |
15,950,000.00 |
16,100,000.00 |
16,500,000.00 |
16,800,000.00 |
17,200,000.00 |
|
Cost of revebue |
10,000,000.00 |
9,500,000.00 |
9,200,000.00 |
9,200,000.00 |
9,100,000.00 |
|
Gross profits |
5,950,000.00 |
6,600,000.00 |
7,300,000.00 |
7,600,000.00 |
8,100,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
Sales , General , Admin |
4,579,000.00 |
4,579,500.00 |
4,589,500.00 |
4,600,500.00 |
4,500,000.00 |
|
Non-recurring items |
90,000.00 |
90,000.00 |
90,000.00 |
90,000.00 |
90,000.00 |
|
|
|
|
|
|
|
|
Operating income |
1,281,000.00 |
1,930,500.00 |
2,620,500.00 |
2,909,500.00 |
3,510,000.00 |
|
Other income and expenses items |
12,000.00 |
13,000.00 |
13,000.00 |
13,000.00 |
14,000.00 |
|
EBIT |
1,293,000.00 |
1,943,500.00 |
2,633,500.00 |
2,922,500.00 |
3,524,000.00 |
|
Interest |
41,000.00 |
42,000.00 |
42,000.00 |
42,000.00 |
42,000.00 |
|
EBT |
1,252,000.00 |
1,901,500.00 |
2,591,500.00 |
2,880,500.00 |
3,482,000.00 |
|
Income Tax |
320,000.00 |
330,000.00 |
390,000.00 |
400,000.00 |
480,000.00 |
|
Net income |
932,000.00 |
1,571,500.00 |
2,201,500.00 |
2,480,500.00 |
3,002,000.00 |
|
Whole Food Cashflow |
|||||
|
Net income |
932,000.00 |
1,571,500.00 |
2,201,500.00 |
2,480,500.00 |
3,002,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cashflows operating activities |
|
|
|
|
|
|
Depreciation |
520,000.00 |
565,000.00 |
610,000.00 |
635,000 |
675,000.00 |
|
Net income (Adjustment) |
150,000.00 |
150,000.00 |
150,000.00 |
150,000.00 |
150,000.00 |
|
|
|
|
|
|
|
|
Changes in operating activities |
|
|
|
|
|
|
Accounts receivable |
(24,000.00) |
(25,000.00) |
(27,000.00) |
(28,500.00) |
(29,000.00) |
|
Inventories changes |
(38,000.00) |
(38,000.00) |
(38,000.00) |
(38,000.00) |
(38,000.00) |
|
other operaring activities |
(25,000.00) |
(25,000.00) |
(25,000.00) |
(25,000.00) |
(25,000.00) |
|
liabilities |
105,000.00 |
105,000.00 |
105,000.00 |
105,000.00 |
105,000.00 |
|
Net cashflow- Operating activities |
1,794,000.00 |
2,479,500.00 |
3,156,500.00 |
3,462,000.00 |
4,024,000.00 |
|
|
|
|
|
|
|
|
Cash flows- Investing activities |
|
|
|
|
|
|
Capital expenditures |
(650,000.00) |
(420,000.00) |
(200,000.00) |
(200,000.00) |
(200,000.00) |
|
Investments |
(430,000.00) |
(430,000.00) |
(430,000.00) |
(430,000.00) |
(430,000.00) |
|
Investing- Net cash flow |
(1,080,000.00) |
(850,000.00) |
(630,000.00) |
(630,000.00) |
(630,000.00) |
|
|
|
|
|
|
|
|
Casfhow - financing activities |
|
|
|
|
|
|
Stock sales and purchases |
(1,300,000.00) |
(1,450,000.00) |
(1,530,000.00) |
(1,720,000.00) |
(1,980,000.00) |
|
Net borrowing |
720,000.00 |
- |
- |
- |
- |
|
Financing -Net cash flows |
(580,000.00) |
(1,450,000.00) |
(1,530,000.00) |
(1,720,000.00) |
(1,980,000.00) |
|
Exchange rate effects |
2,000.00 |
2,000.00 |
2,000.00 |
2,000.00 |
2,000.00 |
|
Net cashflow |
155,000.00 |
1,770,000.00 |
|
|
|
|
|
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Whole Food BS |
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|
Current Assets |
$'000 |
$'000 |
$'000 |
$,000 |
$'000 |
|||||
|
Cash |
540,000.00 |
560,000.00 |
598,000.00 |
648,000.00 |
750,000.00 |
|||||
|
Investments -short term |
450,000.00 |
470,000.00 |
490,000.00 |
470,000.00 |
471,000.00 |
|||||
|
Net receivables |
450,000.00 |
480,000.00 |
525,000.00 |
545,000.00 |
575,000.00 |
|||||
|
Inventory |
512,000.00 |
552,000.00 |
551,000.00 |
553,000.00 |
556,000.00 |
|||||
|
other current assets |
170,000.00 |
180,000.00 |
192,000.00 |
194,000.00 |
294,000.00 |
|||||
|
Total current |
2,122,000.00 |
2,242,000.00 |
2,356,000.00 |
2,410,000.00 |
2,646,000.00 |
|||||
|
|
|
|
|
|
|
|||||
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Longterm assets |
|
|
|
|
|
|||||
|
Investments |
|
|
|
|
|
|||||
|
Fixed assets |
3,560,000.00 |
3,770,000.00 |
3,872,200.00 |
4,104,700.00 |
4,204,700.00 |
|||||
|
Goodwill |
710,000.00 |
710,000.00 |
710,000.00 |
710,000.00 |
710,000.00 |
|||||
|
Intangible Assets |
75,000.00 |
76,000.00 |
77,800.00 |
79,800.00 |
88,300.00 |
|||||
|
Other assets |
45,000.00 |
47,000.00 |
48,000.00 |
58,000.00 |
57,000.00 |
|||||
|
Defered charges |
110,000.00 |
110,000.00 |
110,000.00 |
110,000.00 |
110,000.00 |
|||||
|
Total Assets |
6,622,000.00 |
6,955,000.00 |
7,174,000.00 |
7,472,500.00 |
7,816,000.00 |
|||||
|
|
|
|
|
|
|
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|
Current liabilities |
|
|
|
|
|
|||||
|
Accounts payable |
790,000.00 |
791,000.00 |
792,000.00 |
792,000.00 |
812,000.00 |
|||||
|
Short-term debt |
4,000.00 |
2,000.00 |
3,500.00 |
3,000.00 |
3,500.00 |
|||||
|
other liabilities |
570,000.00 |
470,000.00 |
466,000.00 |
456,000.00 |
476,000.00 |
|||||
|
Total currrent liabilities |
1,364,000.00 |
1,263,000.00 |
1,261,500.00 |
1,251,000.00 |
1,291,500.00 |
|||||
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|
|
|
|
|
|
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|
Longterm liabilities |
|
|
|
|
|
|||||
|
Longterm debt |
1,045,000.00 |
1,055,000.00 |
1,065,000.00 |
1,068,000.00 |
1,078,000.00 |
|||||
|
Other liabilities |
80,000.00 |
80,000.00 |
81,000.00 |
83,000.00 |
84,000.00 |
|||||
|
Defered liability charges |
630,000.00 |
630,000.00 |
640,000.00 |
645,000.00 |
645,000.00 |
|||||
|
Total |
1,755,000.00 |
1,765,000.00 |
1,786,000.00 |
1,796,000.00 |
1,807,000.00 |
|||||
|
Total laibilities |
3,119,000.00 |
3,028,000.00 |
3,047,500.00 |
3,047,000.00 |
3,098,500.00 |
|||||
|
|
|
|
|
|
|
|||||
|
common stock |
3,392,000.00 |
3,508,000.00 |
3,708,000.00 |
3,808,000.00 |
4,100,000.00 |
|||||
|
Retained earnings |
2,449,000.00 |
2,459,000.00 |
2,559,000.00 |
2,759,000.00 |
2,759,000.00 |
|||||
|
Treasury stock |
(2,306,000.00) |
(2,006,000.00) |
(2,106,000.00) |
(2,106,000.00) |
(2,106,000.00) |
|||||
|
other equity |
(32,000.00) |
(34,000.00) |
(34,500.00) |
(35,500.00) |
(35,500.00) |
|||||
|
|
|
|
|
|
|
|||||
|
Total liabilities and Equity |
6,622,000.00 |
6,955,000.00 |
7,174,000.00 |
7,472,500.00 |
7,816,000.00 |
|||||
Consolidated income statement
|
|
2,018 |
2,019 |
2020 |
2021 |
2022 |
|
Total revenue |
33,015,950.00 |
|
16,500,000.00 |
16,800,000.00 |
17,200,000.00 |
|
Cost of revenue |
33,015,950.00 |
33,015,950.00 |
9,200,000.00 |
9,200,000.00 |
9,100,000.00 |
|
Gross profits |
33,015,950.00 |
33,015,950.00 |
7,300,000.00 |
7,600,000.00 |
8,100,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
Sales , General , Admin |
6,024,579.00 |
4,579,500.00 |
4,589,500.00 |
4,600,500.00 |
4,500,000.00 |
|
technology and content |
3,700,000.00 |
|
|
|
|
|
Non-recurring items |
90,000.00 |
90,000.00 |
90,000.00 |
90,000.00 |
90,000.00 |
|
others |
45,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
23,246,371.00 |
28,346,450.00 |
2,620,500.00 |
2,909,500.00 |
3,510,000.00 |
|
Other income and expenses items |
12,000.00 |
13,000.00 |
13,000.00 |
13,000.00 |
14,000.00 |
|
interest income |
25,000.00 |
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
23,258,371.00 |
28,359,450.00 |
2,633,500.00 |
2,922,500.00 |
3,524,000.00 |
|
Interest |
120,041.00 |
42,000.00 |
42,000.00 |
42,000.00 |
42,000.00 |
|
EBT |
23,138,330.00 |
28,317,450.00 |
2,591,500.00 |
2,880,500.00 |
3,482,000.00 |
|
prov for Income Tax |
550,320.00 |
330,000.00 |
390,000.00 |
400,000.00 |
480,000.00 |
|
Net income |
22,588,010.00 |
27,987,450.00 |
2,201,500.00 |
2,480,500.00 |
3,002,000.00 |
|
consolidated cash flow |
|||||
|
Net income |
932,000.00 |
1,571,500.00 |
2,201,500.00 |
2,480,500.00 |
3,002,000.00 |
|
|
|
|
|
|
|
|
cashflows operating activities |
|
|
|
|
|
|
Depreciation |
520,000.00 |
565,000.00 |
610,000.00 |
635,000 |
675,000.00 |
|
Net income (Adjustment) |
150,000.00 |
150,000.00 |
150,000.00 |
150,000.00 |
150,000.00 |
|
|
|
|
|
|
|
|
Changes in operating activities |
|
|
|
|
|
|
Accounts receivable |
(24,000.00) |
(25,000.00) |
(27,000.00) |
(28,500.00) |
(29,000.00) |
|
Inventories changes |
(38,000.00) |
(38,000.00) |
(38,000.00) |
(38,000.00) |
(38,000.00) |
|
other operaring activities |
(25,000.00) |
(25,000.00) |
(25,000.00) |
(25,000.00) |
(25,000.00) |
|
liabilities |
105,000.00 |
105,000.00 |
105,000.00 |
105,000.00 |
105,000.00 |
|
Net cashflow- Operating activities |
1,794,000.00 |
2,479,500.00 |
3,156,500.00 |
3,462,000.00 |
4,024,000.00 |
|
|
|
|
|
|
|
|
Cash flows- Investing activities |
|
|
|
|
|
|
Capital expenditures |
(650,000.00) |
(420,000.00) |
(200,000.00) |
(200,000.00) |
(200,000.00) |
|
Investments |
(430,000.00) |
(430,000.00) |
(430,000.00) |
(430,000.00) |
(430,000.00) |
|
Investing- Net cash flow |
(1,080,000.00) |
(850,000.00) |
(630,000.00) |
(630,000.00) |
(630,000.00) |
|
|
|
|
|
|
|
|
Casfhow - financing activities |
|
|
|
|
|
|
Stock sales and purchases |
(1,300,000.00) |
(1,450,000.00) |
(1,530,000.00) |
(1,720,000.00) |
(1,980,000.00) |
|
Net borrowing |
720,000.00 |
- |
- |
- |
- |
|
Financing -Net cash flows |
(580,000.00) |
(1,450,000.00) |
(1,530,000.00) |
(1,720,000.00) |
(1,980,000.00) |
|
Exchange rate effects |
2,000.00 |
2,000.00 |
2,000.00 |
2,000.00 |
2,000.00 |
|
Net cashflow |
|
|
|
|
|
|
Consolidated Balance sheet |
|||||
|
|
2,018.00 |
2019 |
2,020.00 |
2021 |
2,022.00 |
|
Current Assets |
$'000 |
$'000 |
$'000 |
$'000 |
$'000 |
|
Cash |
540,000.00 |
560,000.00 |
598,000.00 |
648,000.00 |
750,000.00 |
|
Investments -short term |
450,000.00 |
470,000.00 |
490,000.00 |
470,000.00 |
471,000.00 |
|
Net receivables |
450,000.00 |
480,000.00 |
525,000.00 |
545,000.00 |
575,000.00 |
|
Inventory |
512,000.00 |
552,000.00 |
551,000.00 |
553,000.00 |
556,000.00 |
|
other current assets |
170,000.00 |
180,000.00 |
192,000.00 |
194,000.00 |
294,000.00 |
|
Total current |
2,122,000.00 |
2,242,000.00 |
2,356,000.00 |
2,410,000.00 |
2,646,000.00 |
|
|
|
|
|
|
|
|
Longterm assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Fixed assets |
3,560,000.00 |
3,770,000.00 |
3,872,200.00 |
4,104,700.00 |
4,204,700.00 |
|
Goodwill |
710,000.00 |
710,000.00 |
710,000.00 |
710,000.00 |
710,000.00 |
|
Intangible Assets |
75,000.00 |
76,000.00 |
77,800.00 |
79,800.00 |
88,300.00 |
|
Other assets |
45,000.00 |
47,000.00 |
48,000.00 |
58,000.00 |
57,000.00 |
|
Defered charges |
110,000.00 |
110,000.00 |
110,000.00 |
110,000.00 |
110,000.00 |
|
Total Assets |
6,622,000.00 |
6,955,000.00 |
7,174,000.00 |
7,472,500.00 |
7,816,000.00 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
790,000.00 |
791,000.00 |
792,000.00 |
792,000.00 |
812,000.00 |
|
Short-term debt |
4,000.00 |
2,000.00 |
3,500.00 |
3,000.00 |
3,500.00 |
|
other liabilities |
570,000.00 |
470,000.00 |
466,000.00 |
456,000.00 |
476,000.00 |
|
Total currrent liabilities |
1,364,000.00 |
1,263,000.00 |
1,261,500.00 |
1,251,000.00 |
1,291,500.00 |
|
|
|
|
|
|
|
|
Longterm liabilities |
|
|
|
|
|
|
Longterm debt |
1,045,000.00 |
1,055,000.00 |
1,065,000.00 |
1,068,000.00 |
1,078,000.00 |
|
Other liabilities |
80,000.00 |
80,000.00 |
81,000.00 |
83,000.00 |
84,000.00 |
|
Defered liability charges |
630,000.00 |
630,000.00 |
640,000.00 |
645,000.00 |
645,000.00 |
|
Total |
1,755,000.00 |
1,765,000.00 |
1,786,000.00 |
1,796,000.00 |
1,807,000.00 |
|
Total laibilities |
3,119,000.00 |
3,028,000.00 |
3,047,500.00 |
3,047,000.00 |
3,098,500.00 |
|
|
|
|
|
|
|
|
common stock |
3,392,000.00 |
3,508,000.00 |
3,708,000.00 |
3,808,000.00 |
4,100,000.00 |
|
Retained earnings |
2,449,000.00 |
2,459,000.00 |
2,559,000.00 |
2,759,000.00 |
2,759,000.00 |
|
Treasury stock |
(2,306,000.00) |
(2,006,000.00) |
(2,106,000.00) |
(2,106,000.00) |
(2,106,000.00) |
|
other equity |
(32,000.00) |
(34,000.00) |
(34,500.00) |
(35,500.00) |
(35,500.00) |
|
|
|
|
|
|
|
|
Total liabilities and Equity |
6,622,000.00 |
6,955,000.00 |
7,174,000.00 |
7,472,500.00 |
7,816,000.00 |
Considering the EBITDA for the Whole Foods is current total revenue and net income the purchase price may be provided as follows; the expected WACC in two years is estimated to be 15 percent, minimum price is 58,027,500 and maximum price is 61,320,430. The potential sources of value for this merger include possible cost savings due to sharing of overheads and extensive distribution channels. The possible destroyers of value include increase in wage, poor quality of products and customer service. The initial offer price for the firm is 58 billion dollars combination of debt and stock which is affordable for Amazon while it can ensure expansion of Whole Food.
Financing plan
Investing in Whole Food by the Amazon is not likely to damage the credit worthiness of the firm since the amount of available cash and assets can cover the loans taken by the company for purchase. In addition, use of equity to finance the buying out ensures that the risk is shared and hence, Amazon does not run into liquidity problems. The debt will be used in purchasing shares which allowed Amazon to maintain control until the whole amount is completely paid.
Risks
The acquisition may be exposed to various risks which include failure for adhering to the strategic mission of the firm when future and immediate effects for the process are ignored. There is also the risk of ignoring the current business and paying much consideration to the new firm. Moreover, the firm may fail to achieve adequate cash flow. This is because synergies may fail in generation of real cash flow (Cooper & Finkelstein, 2015). Another risk involves encountering risks in the distribution channels of the firm.
References
Cooper, C. L., & Finkelstein, S. (2015). Advances in mergers and acquisitions: Vol. 14. Bradford: Emerald Group Publishing Limited.
