Acquisition of International Power in UK by Gaz de France Essay - 1

Acquisition of International Power in UK by Gaz de France - Essay Example Mergers have been one of the most effective options for companies seeking growth and expansion. This is because merger has the potential of ensuring rapid and speedy turnovers in terms of the revenue, market size customer base and physical infrastructure of a company. This however does not mean that mergers are free from challenges. In this report, it was not the merits of the merger between International Power and Gaz de France that are reviewed but also any challenges that the companies involved must look out for. This is preceded with a detailed description of both companies. This description is very necessary for this report because it is only after having a detailed understanding of the companies involved, their history, their mission and vision, their strategic plans, and of course their projected growth rate that the merger that has taken place can best be analysed in the interest of both companies. Comprehensive macro analysis is also conducted for both companies as this is a lso necessary in judging the economic viability of the merger. Finally, there is a detailed scrutiny of the valuation of the merger. The valuation was done in comparison with not only the macro economic factors outlined earlier but with other micro economic factors such as project depreciation rates, projected inflation rate and projected interest rates are concerned. Concluding, suggestions are made for the companies as to how they can ensure maximisation of the economic stand they have taken and the economic journey they have just began. Brief description of both companies International Power has been one of United Kingdom’s power houses when it comes to established and flourishing businesses. The company was commissioned in 2000 following a demerger by National Power. Since that time, the company’s performance has seen it being listed on the London Stock Exchange and FTSE 100 Index. The Guardian (2012) notes that International Power has attained a sustained growth r ate on the various stock markets. The graph below is a clear indication of the success rate of the company on the London Stock Exchange. Source: The Guardian (March, 2012) Clearly, International Power is an appreciating company when it comes to revenue. The company’s basic business is in power generation. As a power (electricity) generation company, International Power has been touted to have the capacity of producing a gross of 72,360 megawatts of power and a net production of 42,225 megawatts of power (International Power, 2011). This makes the company a global leading competitor in the power generation industry. Gaz de France Suez also has a very good history and operational background. Operationally, both GDF Suez and International Power are in the power generation sector. Additionally, GDF Suez goes beyond power distribution into the distribution of power, generation of natural gases, and also into the generation of renewable energy for its numerous clients around the wo rld. Before the year 20008, the company was simply known as GDP or Gaz de France because it had not merged with Suez Environment, the company in which Gaz de France has up to 35% market stake in. Due to the continuing market urge of the company, it is listed on a number of stock markets including the Euronext Exchanges. The company continues to undertake massive growth and expansion activities including the constructions of â€Å"a gas-fired combined cycle power plant of at least 1,500MW and an associated water desalination plant with a capacity of 102 to 107 MIGD (464 to 486 thousand m?/day)† (GDF Suez, 2012). Macro Analysis The macro economic indicators of companies go long ways to influence, inform and affect their decisions and policies on growth and expansion. Knowing that Gaz de France’