For a Master CCA especially for the current tax-merger, we must prepare a detailed report that reflects a tax, accounting and legal perspectives on merger or on absorption.
We chose to examine the case of Lucent and Alcatel. Alcatel acquired Lucent at the end of 2006. We thought these two companies would be appropriate as both of them are known in the telecom network sector.
Nokia and Siemens announced the creation of a joint venture i.e. Nokia Siemens Networks in mid-2006 to combine their activities for network operators; Ericsson acquired Marconi in 2005 and Motorola bought Symbol Technologies in September of 2006. The transaction between these two U.S. companies was estimated to be nearly $ 4 billion. The sector was undergoing comprehensive changes and transactions were very important in financial terms.
This is how Alcatel and Lucent' was formed on November 30th, 2006 when both companies were facing stiff competition from the Asian markets.
We will analyze this issue by first recalling the context in which the operation took place and objectives of each company during this operation. Then we will discuss the legal, tax and accounting issues of the case. Then, we will list out the consequences of the merger between Alcatel and Lucent for their customers and suppliers
I. Context of the merger: objectives
On April 2, 2006, Alcatel expressed a wish to take over its competitor Lucent and become the world number two behind Cisco suppliers. The two groups had considered merging in 2001 and had begun negotiations in late March.
Tags: Alcatel, Lucent, Alcatel Lucent merger, CCA
[...] Alcatel-Lucent is present in 130 countries and is a local partner with global reach. The service team of Alcatel-Lucent is the most developed and most experienced in the industry. The group also has one of the largest global research and development centers in the communications sector. Alcatel-Lucent favors providing complete solutions with high added value to its customers. It has been organized into five business groups and four geographic regions. The business groups include the Mobile, fixed landline and convergence areas. [...]
[...] Legal, tax and accounting matters Legal This section address issues of national security (communication systems, encryption etc.) The idea is that Alcatel and Lucent will be independent of the management of the parent company and be operated by local teams. Pensions and social security coverage for employees of Lucent Technologies will be supported by the new management. Retirees from Lucent add up to 235,000 and need a pension fund of $ 34 billion. Some questions still remain unanswered for both companies. [...]
[...] Then we will discuss the legal, tax and accounting issues of the case. Then, we will list out the consequences of the merger between Alcatel and Lucent for their customers and suppliers I. Context of the merger: objectives On April Alcatel expressed a wish to take over its competitor Lucent and become the world number two behind Cisco suppliers. The two groups had considered merging in 2001 and had begun negotiations in late March. It was then that Alcatel and Lucent Technologies had reached an agreement to begin the process of merging the two companies. [...]
[...] The advantages of the merger The very first advantage was the geographical fit between Alcatel and Lucent technologies. Alcatel had 42% of its sales in Western Europe (according to the figures of 2004) and the activities of Lucent Technologies were centered in the United States where the company made 63% of its turnover (according to the figures of 2005). The merger would lead to a perfect balance in terms of activity in different geographical areas each in Europe, North America and Asia Pacific). [...]
[...] ed induced by the proposed parity Note that BNP Paribas, has affixed a notice on the exchange ratio that has been deemed "reasonable for the shareholders of Alcatel." The Thane social Alcatel will increase from 2.708 billion euros to 18,078 million after the merger (based on the titles to the capital of Lucent). III. The consequences of the merger Consequences for shareholders, suppliers and customers Under the terms of the agreement that was signed by both parties, the shareholders will receive 0.2 of Alcatel-Lucent for each share. Eventually, they will hold 40% of the new group and share equally with Alcatel's squares on the board. [...]
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