Capital Corp Merchant Banking
It has been over two years since Fed merged with May transforming the two entities into one of the largest retailers in the world with nearly $30 billion in annual sales. Based upon May’s financial statements, one full fiscal year after the merger took place, a financial analysis that allowed one to conclude a negative change in May’s financial position from year-end 2005 was due to short-term financial merger costs and large-scale balance sheet transactions. Such changes should not overshadow May’s high probability of increased earnings in the coming years.
Analysis of May’s income statement showed the positive net sales increase of 20% following the merger was not strong enough to offset operational costs and expenses that contributed to a 4% decrease in net income.
Common size analysis showed nearly all accounts after operating income stayed relatively similar to past results; however, the increased integration and administration costs of the merger contributed to the operating income decreasing by 4% leading to the same eventual percentage decrease of net income.
Major changes to May’s balance sheet a year after the merger included a $3 billion decrease to the current assets. This was due to the combined effect of an increase in cash and equivalents from the acquisition and later divestment of non-performing retail locations that was offset by a $2 billion decrease to accounts receivable.