AQUA Logistics Limited Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

AQUA Logistics Limited Case Study Solution

Critical Issues faced by Indian Logistics Sector:

Indian Logistic sector was a major contributor for the increasing GDP of the economy and it was contributing at around 13%. However, the Logistic sector was facing critical issues which include the problems related to the poor infrastructure and lack of capability to manage the expansion of growing economy of Logistics sector. This resulted in the increasing turnover, inefficiency and increasing cost of operations without proper management and control over it.

Two major categories of problems include the inefficiency due to the external factors and internal issues. However, inefficiency due to the external factors was the consequence of heavy traffics on roads, lack of adequate resources, ineffective warehouses and inefficient value chain functions. On the other hand, internal issues were related to the high cost of operations due to the selection of costly medium of transport i.e. road transport.

This resulted in high cost because the conditions of the roads were unfavorable due to heavy traffic and poor infrastructure and taking too much time in delivering the product which is known as transit time. Moreover, the other related problems were heavy consumption of fuel, excessive requirements of documentation, changing regulations of state and weak regulations of government to collect taxes which resulted in spending less on developing the infrastructure of the Indian economy. This also resulted in heavy freight costs due to the fragmented industry of India which was high as compared to the developed countries.

Significant Attributes:

Continuous growth in logistics network which was integrated by Aqua Logistics for leveraging the benefits and changing with the external environment made it a significant attribute in Aqua Company to get acquired in Logisticssector. It is followed by the global presence and better equity position of the company which attracts the acquirer to enjoy the benefits by consolidating with Aqua Limited.

Moreover, the strong base of its assets and the latest technology used for delivery system makes the company stand out in the industry which attracts the acquirer for merging with this company. This also leads to better relationship with its clients and increasing the customer base which will result in the economies of scale and this will lead to the synergy generated from the operations for both the companies.

This may result in the synergy of capabilities and strength in functional departments for both the companies with value addition in their services and making the services better and effective by use of effective medium of transport.

Value Drivers:

It is necessary for the acquirer to first look at the value drivers before acquiring the target company so that it may be able to forecast its estimated value for getting the maximum benefit from the deal.

Forecasting of the cash flows

The most effective value driverfor ALL is forecasting of the cash flows. It shows the effectiveness and efficiency of management to maintain the liquidity position and maintain its revenues. This will lead to the valuation of a company if it is sold and the available risk over it. There is inverse relationship between losing the risk of cash flows and the price paid for acquiring the target company.

Diversity in Customers:

It is necessary to evaluate the customer base of the target company as it helps in maximizing its revenues and benefits from the synergy. If the customers are contributing significantly in company’s revenue, then they should be given importance. If they are lost, then the company will lose its significant portion of sales. Moreover, with the change of ownership, theymay lose confidence and trust in company and this may result in liquidity issues for the company.

Financial Information and estimation reliability:

The target company needs to present its past financial statements for the evaluation of its performance. It shows the true and fair picture of the company’s revenues and profitability for the acquirerand not merely on the basis of cost. However, company needs to evaluate the cost effectiveness of thetarget company. If there is misrepresentation in the financial statements of the target company, it will affect the decision of acquisition.

Growth potential of the company:

This shows credibility of the target company for forecasting the future cash flows and defending the growth rate of the cash flows, which is that showing correct value of the company will give the company leverage for getting high value from the acquirer. This needs to take into consideration all the possibilities and assumptions for such growth such as technological advancement, effective workforce, increasing profit margins etc.

AQUA Logistics Limited Harvard Case Solution & Analysis

Economies of Scale:

It is necessary to evaluate the position of the acquirer after the merger so that it may result in an effective solution for the company. ALL has shown consistency in its excessive cliental base and the expertise in technological advancement which will generate higher returns for the acquirer by enjoying economies of scale through effective and efficient production...................

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