Schneider and Square D v3

Schneider and Square D v3 - Schneider and Square D...

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Schneider and Square D - Acquisition Analysis Groupe Schneider and Square D are both major players in the electrical equipment markets in Europe and US respectively. Schneider is considering the acquisition of Square D. In our analysis we will discuss several important issues in this possible international acquisition. Schneider could reduce the selling costs in the United States by using Square D’s sales channel. Schneider would be able to increase its international presence and also reduce the cost of R&D by combining the two research centers. However, Schneider will have to pay additional costs for acquisition and restructuring costs. It will have to spend enormous amount of time and effort to persuade Square D’s directors and shareholders that are against the acquisition. Square D may be able to reduce costs by eliminating departments that will become unnecessary due to the acquisition. In addition, Square D will use Schneider’s sales channels in Europe. However, Square D will be under Schneider’s control and lose the power to manage the company. One disadvantage of acquiring Square D would be the amortization of goodwill, according to the French accounting, Schneider would have to amortize goodwill and this would dilute earnings and most likely hurt their stock price. However, one advantage to Schneider is the current exchange rate. The dollar is at a depressed level, which makes it cheaper for them to purchase a U.S. firm. We feel that these factors cancel each other out so the net effect to existing Schneider shareholders is negligible. We will first examine the value of Square D as a stand alone company and then
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This note was uploaded on 06/22/2008 for the course ACCT 824 taught by Professor Cataldo during the Spring '08 term at Suffolk.

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Schneider and Square D v3 - Schneider and Square D...

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