Finance Case study (Financial Report)
Pormind plc is a small capitalised UK resident manufacturing company which is listed on the London Stock Exchange.
Pormind plc suffered three years of loses following the Global Financial Crisis of 2008 and is seeing many of its traditional customers seeking supplies from new growing markets.
The new Finance Director believes that Pormind must prepare itself for the changing global economy by expanding operations into a number of emerging markets. He proposes that Pormind seeks to undertake a series of takeovers of private companies in countries which have been identified as suitable for Pormind to seek takeover targets in. The Finance Director proposes that Pormind undertakes five acquisitions within the next ten years. The Finance Director is proposing that calculating the Net Present Value of any proposed takeover should form the basis for deciding if a local business would make a suitable target for Pormind.
In order to undertake the kind of expansion activity envisaged by the Finance Director it will be necessary for the company to raise a very significant amount of new capital. The Finance Director believes that where possible new capital should be raised in the country in which the takeover is taking place.
You have been retained as a consultant by the Board who want you to undertake an initial study into the feasibility of the Finance Director’s proposal.
Prepare a report addressing the following issues:
a) A critical assessment of the proposal to raise capital locally rather than in the UK. You should consider the costs, the risks and any benefits or disadvantages of the proposal. (15 marks)
b) A review of the literature to identify factors which academics consider to be fundamental to an analysis of country risk. You should conclude your review with a list of factors which you consider to be fundamental together with some attempt to rank them for importance. (30 marks)