Question 1

The scenario

Jupiter Holdings Plc has a portfolio of investments in subsidiary companies and is seeking another acquisition that complements the others.

The subsidiary companies already in the group include: machinery and commercial vehicle dealership; finance company; equipment leasing company; haulage company with a fleet of 200 heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is making a loss.

Two possible acquisition targets have been identified:

Griffin Care Services Ltd is based in leased converted hotels and provides care services for young people unable to be cared for in the foster system. Jupiter Holdings Plc are looking into the possibility of converting their failing hotel into a provider of care services and Griffin Care Services Ltd is looking for another property to continue expanding around the UK;

Midlands Commercials Ltd has a large unit and caters for the storage and repair of up to 70 commercial vehicles at one time, and has the potential for more space as it is based in a large empty industrial area. Midlands Commercials is looking for a contract with a fleet operator to stabilise their income and growth.

Extracts from the financial statements of both target companies are attached:

Requirements

1.1  Prepare a business report, with an appendix for your ratio analysis. 

It is to be addressed to the board of directors of Jupiter Holdings Plc. 

You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies.

Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report.

1.2  Critically evaluate the working capital management (WCM) of both companies using academic references and draw conclusions on which is stronger.

1.3  Create a table that lists the advantages and disadvantages of all the finance options available to Jupiter Holdings Plc. Explain, with references, the source of finance you recommend as most suitable way to finance the investment in either Griffin Care Services Ltd or Midlands  Commercial Ltd.