Merger of Gwinnett Medical Center and Dekalb Medical Center Inc.



Merger of Gwinnett Medical Center and Dekalb Medical Center Inc.

Introduction

Merger is considered as one of the effective strategy in the field of corporate finance. It deals with purchase, sale, and division of two or more companies. The main aim of merger is to expand the operations of the company in a new field or product lien or geographic location. The core agenda of this paper is to analyze the financials of the two health care centers namely Gwinnett and Dekalb Medical Center with regard to potential benefits and risks of merging. The key areas to analyze the business value are its capital structure and cost of capital in order to determine the possibility of mergers.

Discussion

The capital structure of a business represents the sources of funds or finance of a business. It could be either alone or combination of equity, debt or mixed financial securities. The financial procedures associated to this concept are gearing ratio, debt to equity ratio, and long term debt to total capitalization ratio (Fraser. L. M. and Orimiston. A., 2007). The debt to equity ratio of Gwinnett Medical Center for the year 2010 and 2009 is 57.66% and 59%. Therefore, it represents that health care has decreased its funding by 8% via debt. The debt to equity ratio of Dekalb Medical Center is 54.5% and 54% in 2010 and 2009. Therefore, we can say that company is financed by more than 50% of debt as compare to equity. The capital structure of the institution has slightly increased by .05% difference. Gearing Ratio of Gwinnett Medical Center is estimated to be 1.16 and 1.14 for the year 2010 and 2009, which represents that company has low gear and higher equity share capital. Therefore, company has lower leverage and financial ...