20.4 Oleander Enterprises Limited is a small holiday company run by its two principal directors and shareholders, Libby and Lisa. The company organizes exclusive (and expensive)

holiday tours of French chateaux. During the 4 years since it was set up the company has gone from strength to strength. It now employs six people and it makes substantial annual profits. The company has a cash surplus and the directors have been considering ways of using the surplus to expand the business, possibly by starting up operations in new countries. Recently, the directors have been approached by Loretta, the managing director of another holiday company, Oxus Orlando Limited, which organizes holiday tours in Turkey. Loretta is the principal director and shareholder of Oxus Orlando. She would like to sell her company and retire on the proceeds.

Required: advise Libby and Lisa on:

i) The advantages and drawbacks of expanding by buying into another company ii) The type of information they will require in order to be able to make a decision on whether or not to buy Oxus Orlando.