1. DESCRIPTION AND GOALS OF THE CASE
2. QUESTIONS YOU MUST ANSWER IN YOUR REPORT
3. APPENDIX 1: CONFIDENTIAL SUPPLEMENTARY INFORMATION FOR MANAGEMENT OF FLINDER VALVES AND CONTROLS
4. APPENDIX 2: CONFIDENTIAL SUPPLEMENTARY INFORMATION FOR MANAGEMENT OF RSE INTERNATIONAL
5. SUPPLEMENTAL TECHNICAL NOTE: VALUATION AND MERGER NEGOTIATION
CASE 43: FLINDER VALVES AND CONTROLS INC.
DESCRIPTION AND GOALS
SET IN MAY 2008, THIS CASE REFLECTS THE SEPARATE PERSPECTIVES OF CHIEF EXECUTIVE OFFICERS TOM ELIOT AND BILL FLINDER AS THEY APPROACH THE NEGOTIATIONS OF RSE INTERNATIONAL CORPORATION TO ACQUIRE FLINDER VALVES AND CONTROLS INC. YOUR TASK IS TO COMPLETE A VALUATION ANALYSIS OF THE TARGET AND BUYER AND TO NEGOTIATE A PRICE…show more content… FVC and RSE might establish a joint venture of some sort, though Flinder suspected that joint ventures faced the same kinds of integration problems as did acquisitions; as a result, he thought joint ventures were an inferior alternative. FVC could move forward alone, but that would require raising large sums of new debt and equity to finance the rapid expansion of the firm’s “widening gyre” program. Flinder was concerned that he might lose voting control of the firm regardless. It seemed to him that doing a deal with a known and friendly partner today would prepare the way for an orderly transition for himself and the firm.
Flinder expected the merger to generate significant cost gains. RSE’s greater purchasing power would lower the cost of materials and components for FVC. RSE’s new resource-management system could be expected to reduce FVC’s in-process costs. Estimates from FVC’s accounting group had identified pretax constant-dollar cost savings of $2 million in the first year of operation and $4 million thereafter. He also recognized other synergy gains that arose from RSE’s stronger marketing clout, cross-selling with other RSE products, and its deep financial pockets. He believed that the widening-gyre project could have a broad application in nautical, aerospace, and automotive products. Based on the investment required to bring such technology to market, he estimated the economic