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Gold/Mining/Energy : GEAC.....Canadian best kept secret
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To: PlayTheKing who wrote (844)7/30/1999 8:11:00 PM
From: Serge Collins  Read Replies (2) of 1571
 
There's a lot of talk about this deal, but it's mostly generalities. Can someone explain the fundamental aspects of the deal. Here are a few unanswered questions:

1. Why go to Europe to make an acquisition? This will only complicate integration.

2. This stock could have been purchased for 42p earlier this year, so why did Geac pay such a big premium? Ignore the revenues, there are many companies out there trading at .02, .03, .04 x sales. Big revenues don't make it a good deal.

3. How profitable is this company? How many profitable quarters have they had in the last eight quarters? Will their business model be a drain on Geac's bottom line? There is no sense pumping up the top line if the bottom line goes negative. It's profit margin that counts, not revenues.

4. How much Goodwill does Geac have to assume if they buy them out at the announced price? How much affect will that have on profitability?

5. What shape is JBA's balance sheet in? How much debt/liabilities is Geac taking on?

6. Will this acquisition mean writedowns in future quarters?

and last but not least,

7. Why does this company insist on growing through acquisitions when investors are looking more and more for companies that grow internally? Don't they realize that investors will pay more for a company that can create its own growth rather than one that tries to buy it? (If someone tells me that it is difficult to grow in this software niche without acquisitions, my answer will be -- ah, therefore, it's a mature sector and growth multiples should be ratcheted downward.)

Comments on these points would be appreciated.

Thanks.
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