In this assignment, the author finds herself in the role of a consultant, whose client intends to acquire VW. The objective of this paper is to provide an assessment of VW's financial performance and financial position to prepare a proposal to the client, that assists in deciding whether acquiring VW is financially beneficial.
For a comprehensive insight into VW's financial performance and position, the approach was as follows.
Hereafter, in chapter two, the theoretical background provides the reader with knowledge about VW and describes the meaning of DD in M&A processes.
Chapter three, the financial statement analysis, is subdivided into FDD and CDD. In the FDD profitability ratios, asset and capital structure KPIs, and liquidity ratios are described and reviewed. The ratios are based in each case on the corresponding statement, the income statement, the balance sheet, and the CFS. The annual reports of VW from the years 2017-2019 serve as a reference for the financial KPIs. The CDD is based on Porter’s Five Forces framework, which considers future trends, and in addition, includes a brief benchmarking to identify competition between global car manufacturers within this framework. To conclude chapter three, the results of FDD and CDD are summed up.
In chapter four, a proposal to the client is provided, which speaks for the fact that VW is worth buying in terms of the numbers considered.
Table of Contents
1 Introduction
2 Theoretical background
2.1 About the Volkswagen Group
2.2 The relevance of the Due Diligence
3 Financial statement analysis of the Volkswagen Group
3.1 Financial Due Diligence
3.1.1 Profitability ratios based on the income statement
3.1.2 Asset and capital structure based on the balance sheet
3.1.3 Liquidity ratios based on the cash flow statement
3.2 Commercial Due Diligence
3.3 Summary of FDD and CDD
4 Proposal to the client
Appendix
Appendix A: Volkswagen share performance
Appendix B: Calculation formulas
Appendix C: Essential pages of used statistics
Objectives and Topics
The primary objective of this assignment is to conduct an assessment of the Volkswagen Group’s financial performance and position. By acting as a consultant for a client intending to acquire the company, the paper evaluates whether such an acquisition is financially sound through the application of Financial Due Diligence (FDD) and Commercial Due Diligence (CDD).
- Analysis of financial performance and position using annual reports from 2017 to 2019.
- Evaluation of profitability, asset structure, and liquidity through specific financial KPIs.
- Assessment of market position and future sustainability via Porter’s Five Forces framework.
- Benchmarking against key competitors in the global automotive industry.
- Development of a strategic proposal for a potential acquisition.
Excerpt from the Book
3.1.1 Profitability ratios based on the income statement
For a structured financial analysis this paper considers the income statement, the balance sheet, and the CFS. The income statement shows profitability ratios that are used to identify the company’s potential to make a profit from its operations (Lessambo, 2018). Selected ratios can be found below.
The EBIT margin has developed positively in the last years and belongs with an EBIT margin of 7.9% in 2019 to a good up to a very good range in comparison with the competition (see figure 6).
The ROS is directly linked to the operating profit margin. It indicates how much profit is generated per euro of sales. The increasing ROS shows that VW is growing efficiently. The guideline is greater than 5%, however, the values are strongly dependent on the industry. The numbers in the above table show that VV’s ROS is slightly above the guideline.
The ROA indicates how profitable VW is relative to the total assets, so the higher the percentage is the better it is. ROAs that are above 5% are esteemed to be good. In this case, it means that VW derives comparably fewer euros of earnings from each euro of its assets (Vollmuth and Zwettler, 2016).
Summary of Chapters
1 Introduction: This chapter outlines the consultant role, the objective of assessing VW's financial status for a potential acquisition, and the methodological approach covering FDD and CDD.
2 Theoretical background: Provides an overview of the Volkswagen Group, its corporate structure, and defines the significance of Due Diligence in M&A transactions.
3 Financial statement analysis of the Volkswagen Group: Detailed quantitative analysis of profitability, asset structure, and liquidity, combined with a qualitative market analysis using Porter's Five Forces.
4 Proposal to the client: Synthesizes findings to offer a recommendation regarding the acquisition while noting essential limitations and strategic considerations.
Keywords
Volkswagen Group, Financial Due Diligence, Commercial Due Diligence, M&A, Financial Performance, Profitability Ratios, Asset Structure, Liquidity, Porter's Five Forces, Automotive Industry, Equity Ratio, Debt Ratio, EBIT Margin, Market Analysis, Investment Decision.
Frequently Asked Questions
What is the core focus of this research paper?
The paper serves as a consultant's report to evaluate the financial health and market positioning of the Volkswagen Group to assist a client in a potential acquisition decision.
What are the primary research areas covered?
The study focuses on Financial Due Diligence (FDD) including ratio analysis, and Commercial Due Diligence (CDD) using strategic frameworks to analyze the competitive environment.
What is the ultimate goal of the analysis?
The goal is to determine if acquiring the Volkswagen Group is financially beneficial and to provide a professional recommendation based on current financial data and market trends.
Which scientific methods are utilized?
The paper employs financial statement analysis (profitability, liquidity, and capital structure ratios) and the strategic Five Forces framework by Porter to evaluate future sustainability.
What does the main body address?
It provides a deep dive into VW's financial statements from 2017-2019, compares performance with major competitors like Toyota and BMW, and analyzes market drivers like electric mobility.
Which keywords best characterize this work?
Key terms include Due Diligence, Financial Performance, M&A, Volkswagen, Profitability Ratios, and Market Sustainability.
How does the Volkswagen Group perform regarding its EBIT margin?
Volkswagen showed a positive development with an EBIT margin of 7.9% in 2019, placing it in a strong position when compared to global competitors.
What role does the emission scandal play in this analysis?
The scandal is identified as an ongoing concern and a significant legal risk that must be considered by any potential buyer due to potential future charges and associated costs.
- Citation du texte
- Anonym (Auteur), 2021, Volkswagen (VW). Financial Performance and Financial Position, Munich, GRIN Verlag, https://www.grin.com/document/1150129
