Creating and measuring shareholders’ value through acquisition : A case study on Sage Plc.

Abstract

The key corporate objective of any company should be the constant creation of shareholder value. This can be achieved either organically by earning revenue from the value proposition they offer customers or through mergers and acquisitions. Sage plc, a FTSE 100 company on the London Stock Exchange is a stalwart contender that believes an effective growth strategy has to be the right kind of acquisition - a business combination that increases the power of the customer value proposition allowing the combined entity to achieve genuine organic growth. As one CEO put it, - believe that you don't get better by being bigger, you get bigger by being better.. (Internet Ref 7) This study undertakes to evaluate Sage plc's strategy of protecting and improving shareholder value through acquisitions. It will also determine whether all management's thoughts and actions, from strategizing with respect to competitive positioning and cutting costs and streamlining operations to creating a productive environment that provides employees with economic benefits and opportunities for advancement, correlate to preserve and increase the organic growth of the firms they are managing and whether effective shareholder value was created or diminished over the designated period of major acquisitions. In order to address this issue the thesis presents a general view on the different approaches used to create shareholder. The use of mergers and acquisitions, to increase growth in an organisation, is discussed and analysed. A key aspect to value creation is measurement. A suitable value based management metric must be established in order to measure value creation. The study will examine all different metrics used to measure shareholder value creation and find the most appropriate measurement. Finally this study makes recommendations, based upon its finding on value creation and measurement.