Adecco

1139 Words Mar 1st, 2014 5 Pages
1. How has Adecco been able to outperform its rivals in the staffing industry? What is the strategic and economic rationale for its acquisition of Olsten?
As a global leader in the employment services industry, Adecco had a focused strategy aimed at being the “employer and supplier of choice”. This was attained by rapid growth, which also proved quite attractive to shareholders. Adecco knew that their clients preferred to deal with one company globally in order to realize consistent service. Much of Adecco’s offering came in the form of general staffing (88%) however, they enjoyed higher margins on specialized offering such as financial and IT which also differentiated them from the competition.
Adecco had a goal to become number one
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This violation of the covenants meant that Olsten would likely be deemed in default of its debt.
NOTE 1 - (See Analysis Spreadsheet, Tab – Question 2, line 39)
NOTE 2 - (See Analysis Spreadsheet, Tab – Question 2, line 55)

3. Based on Adecco’s pro forma estimates of the staffing business of Olsten in Exhibit 13, what is your estimate of total enterprise value? For this calculation, make the following assumptions:

The estimate for the total enterprise value took into consideration the following assumptions: 1. Acquisition completed as of 1/1/200 2. Enterprise long term capital structure based on a 20% debt, 80% equity ratio 3. EBIAT figured without deducting goodwill amortization 4. Competing firm debt beta of 0.2 5. No debt assumption by Adecco, payments made to minority shareholders, and tax benefits due to Adecco US royalties.
With all the above aspects considered, Adecco arrived at a debt portion of WACC equal to .96% and an equity portion of 9.31% resulting in an overall WACC of 10.27%. This was calculated utilizing a beta of equity considering a beta of debt and assets of 0.2 and 0.48 respectively. Utilizing the free cash
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