CASE JAGUAR PLC, 1989
CASE ASSIGNMENT QUESTIONS
(Write no more than 3 pages, excluding eventual annexes)
1) Evaluate the strategic merits of combination between Jaguar and either Ford or General Motors. What are the sources of value created, if any, by such a combination? How should it be structured? (e.g., as a merger, as a joint venture, a minority interest, etc.) to capture the value you identified?
As the question is to evaluate strategic merits between Jaguar and its future partner and the value created by any combination the sources of value that will be created will be the following. First of all the so much needed financial aid, Jaguar will be provided by the partner. As a second value that will be created will be a very…show more content… My evaluation is most sensitive with the free cash flow, because they have major change in free cash flow in 1999 to 1990 of minus 190 million pounds. Even after 4 years they have the first positive cash flow. Jaguar real value implies the assumption of Exhibit 7 as 1.7 billion. However the plan they have of tripling their assumption is more than optimistic, because is hard to triple their assumption more than 3 years, because of current situation they are on the market. With the little less optimistic scenario their value will drop on 1.5 billion pounds which will maybe give us the real value of the company, if things turn out as planned. However if their plan really works the real value with the included goodwill be 2 billion pounds. It is just an estimate.
3) Try to generate different evaluation scenarios, at least one less optimistic Here is one optimistic and one pessimistic scenario. With the pessimistic scenario we took WACC with +3, 5 % and it give us a discounted cash flow value of 1,6 billion pounds which indicates a major drop in real value of the company. With the optimistic scenario we took WACC with - 4,5% and it gave us an increase of value to 2.38 billion pounds which indicates that with a little bit better adjusting and a good marketing campaign the optimistic scenario will give us an optimistic scenario of 590 million