Beyond Products

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Question 1: Evaluate the different market opportunities available to Peter, taking the financiers’ perspective. What would be your recommendations as a business angel?
The success of the flow binding shows that people are looking for a better solution than the now available bindings. Hereby, it is clearly very important to keep the soft boots, as they provide the snowboarders the necessary comfort, together with the ease of the step-in bindings. However, attention need to be taken into account to avoid the disadvantages of the flow bindings.
As a business angel I would trust Peter on this matter, as he has been a semi-professional snowboarder. He knows the important characteristics the bindings must have in order to be the most
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The recent announcement of the take-over of it by Amer Sports Corporation probably influenced its valuation. Indeed, its P/E ration is much higher than the average for peers without ADIDAS-SALOMON AG. As a result, we prefer to use Equity Value based on P/E multiple without taking into account ADIDAS-SALOMON AG (Table 3).

Table 3

However, this approach has some significant disadvantages. First of all, the companies are not really comparable, since most of them are mature players on the sport equipment market. They also offer much more diversified product line, including clothes etc. Secondly, we cannot be sure that today’s multiples can be used in 2011, since they are changing over time.
In this case we consider DCF valuation more realistic, although both of the possibilities were examined.
The investment will be done in two rounds, one in June 2005 (€300.000) and one in June 2006 (€500.000). We assume a discount rate of 50% (Table 4) due to two main reasons: VC need to be compensated for the risk they taking on and the difference between their actual expectations and earnings in case of success.
Table 4 Valuation based on NPV gives a result of 14.24% of the ownership to be provided to VC. This portion could be diluted to 11.12% if the second investment would be financed by equity instead of debt. In this case for the second investment 13.66% of ownership will be provided to the second round investors. And even in this case entrepreneur could still
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