Question

DETAILS OF THE COMPANIES

Getswift Ltd is an Australian newly listed company which provides a software distribution solution. This is the same company that was used in the Individual assignment. It is expected that students research this company beyond just the financial statements (especially for Part B) Pursuit Pty Ltd has been a target customer of GetSwfit’s for many years. It is a large distribution company which services supermarkets. The acquisition of Pursuit would allow GetSwift to increase its scale and penetration into the market. The actual trading business of Pursuit is much larger than Getswift but it has been operating as a family run private business. The directors are John and Ellen Pursuit who are selling their business to retire. For the last few years, their son Steven (an ex-partner of PWC) has been running the business and he will continue to do so after the sale. He has primarily been responsible for the growth and success of the business in the last few years. The shareholder of Pursuit is currently the Pursuit’s family trust which will also acquire the shares in Getswift in the transaction.

REQUIRED

The directors of Getswift Ltd are aware that the acquisition of Pursuit Pty Ltd will require changes to their corporate governance practices and board in order to comply with the ASX Corporate Governance Principles. They have requested a short report requesting your recommendations. A minimum of Three (3) recommendations are required.

In order to do well in this report, students are expected to

? Take into consideration and apply your knowledge of the current corporate governance structure of Getswift and Pursuit. Your report should also take into account the current compliance of Getswift with the ASX corporate governance principles.

? Consider the sophistication of the audience and adapt your writing style accordingly.

Answer 1

Good corporate governance is essential for efficient capital markets and investor confidence. The Australian Stock Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations set the benchmark for good corporate governance practices in Australia.

The directors of Getswift Ltd are in the process of acquisition of Pursuit Pty Ltd. They need to be aware of the key 8 principles of good corporate governance and must make their decision within the framework and structure of this principles and recommendations. The key principles are -

1.    Lay solid foundations for management and oversight

2.    Structure the board to add value

3.    Act ethically and responsibly

4.    Safeguard integrity in corporate reporting

5.    Make timely and balanced disclosure

6.    Respect the rights of security holders

7.    Recognise and manage risk

8.    Remunerate fairly and responsibly

So as the directors of Getswifft Ltd, it is their primary job responsibility to lay a solid foundation to their existing business so that the current business stays grounded and makes further in-roads into newer markets. The directors based on their due diligence have found out that acquisition of Pursuit would allow GetSwift to increase its scale and penetration into the market. Pursuit Pty Ltd has been a target customer of GetSwfit’s for many years. It is a large distribution company which services supermarkets. So by acquiring Pursuit, the reach of Getswitch would be to a bigger and larger target market, which will surely lead to their boost in income. So by taking the right steps, the directors of Getswift satisfy the first primary principle to “Lay solid foundations for management and oversight”

Further the directors are taking all the correct steps to ensure that their act is fully justified. This is reason why they are studying the ASX Corporate Governance Principles to do the correct thing in this acquisition process. By their actions, they are fulfilling the 3^rd principle, namely “Act ethically and responsibly”

The third and main principle in this transaction would be “Recognise and manage risk”. Here the directors are requested to a do a bit of more research, do financial analysis and forecasts the benefits to Getswift, post their acquisition in the short to medium to long term. The director first need to understand what is the acquisition price of Pursuit and whether it is a fair value to the assets being acquired. Furthermore, if funds are ready available with Getswift or whether they have to arrange for the same from banks as loans or go to the public with an IPO or public offering.

Thereafter the directors need to identify the main internal and external risk sources that can affect their prospects and future. The directors need to satisfy themselves that the calculated risk management is well worth the risk, as the value addition and creation of newer values by acquisition of Pursuit far out weigh the risks.

So through this report, it is recommended that the board must go through the “Recognise and manage risk” corporate governance principle and satisfy all the parameters set therein, before taking any further steps in the acquisition process.