only $131 000.Opportunities1. Niagara could increase their reputation and competitive position within the region.2. Turn Pelham’s assets into income generating assets by reducing costs such as data processing and salaries.3. Niagara’s commercial loans are currently capped out at 15%. The fact that Pelham has no commercial loans gives Niagara increased room for growth within this promising area (see Appendix E). This would allow for better maturity matching and higher spreads, which ultimately reduces risk and produces larger profits.4. Forecasts indicate significant positive contributions to Niagara’s bottom line. NPV calculations show a contribution of roughly a half a million in additional income (seeAppendix F).Threats1. A failed merger may jeopardize not only the future success of Niagara but also its very survival: the merger has its risks.2. Merger will produce a loss in the upcoming fiscal year of $71 000. 3. Agreement not to eliminate Pelham’s clerical staff may prove to be too restrictive in terms of how to operate the merged company.Option 2: Decline Merger OfferStrength1. Continue to operate as a profitable and successful company.Weakness1. Miss out on a potentially excellent investment opportunity.Opportunities1. Merge with a more profitable company.2. A refusal might result in more funding from the OSDIC being offered to complete the deal, along with better conditions. Negotiate a better deal than the existing proposal for the merger. Threats1. Niagara may face backlash from consumers not having faith in the credit union system if Pelham is liquidated by the OSDIC. There is potential for serious financial consequences.RECOMMENDATION AND CONCLUSIONSGiven the facts of the case, we recommend a merger with Pelham Credit Union. We feel that the benefits of a merger are simply too great to ignore. The following highlights our key reasons:1. Top management support and experience with mergers.2. NPV ...
