Flinder Valve Case Study Essay

NEXT plc, has managed to make a few acquisitions, which affects the financial position in terms of cash considerations and return on investment when acquiring 100% share capital in Lipsy Ltd. The importance of financial resources to accommodate such acquisitions, points out how financial backing can introduce new revenue streams in the long term and can lead to an increase in profits as well as the brand image of NEXT.

In early May 2008, talk began between president of Flinder Valves, Bill Flinder and Tom Eliot, chairman and CEO of RSE about a possible acquisition of Flinder Valves by RSE. The industrial manufacturing industry had taken a hit due to rough economic times and the acquisition made sense. Both leaders were very concerned about the challenges and risks of the deal. Flinder was a company that engineered and manufactured specialty valves and heat exchangers. These products required extensive research and development and they were one of very few firms working in these types of applications. A bullk to FVC’s sales came from defense and aerospace applications. They were known for their

Our estimated cost of capital, 20.81%, is lower than Ricketts’ expected return, 30%-50%, thus the investment is worthy. However, it’s higher than other pessimistic members’ expected return, 10%-15%, making the decision more complex and requiring further valuation。

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

This case study examines the proposed merger of Vulcan Materials and Martin Marietta both providers of construction aggregates. A stock-for-stock merger had the potential of making the company a global leader in construction materials, but was marred by disagreements over executive succession, location of new headquarters and the stock exchange proposed by Martin Marietta. Furthermore, as negotiations deteriorated Martin Marietta attempted a hostile takeover of Vulcan and also tried to get its directors appointed to

in our calculations, as this company exhibited dramatic value differences to others in the sample, (likely to skew our results and prove misleading). Using the average of the revised sample field for each ratio, we inserted Torrington’s values where appropriate to generate an entity value. The findings generated two values for Torrington, 606 million and 398 million. Taking the average of these two numbers, Torrington exhibited a relative value of 502.41 million. Because of the lack of related information given in the case, and the often large differences in measures amongst competitors, different capital structures, internal management strategies, there remained many unknowns in our model. We decided it would be best to use this valuation to reaffirm our assumptions in our DCF valuation. (Please see exhibits)

The 50% premium can be explained by the valuation of the firm based purely on its projected future cash flows and assumed growth rate (value = $391.58 million) plus the added value that the ITS can provide (value = $114.2 million) when the leveraged buyout is completed. There are two components to the ITS or income tax shield –

First of all, we can estimated what price is competitors are able to pay to acquire AirThread Connections by creating the base-case valuation of AirThread Connections. On the hands, by valuing the upside valuation of AirThread Connections, the estimation of synergies and the suitability of ATC strategic with ACC operations. The steps in valuation of base-case Valuation of AirThread Connections and Upside Valuation of AirThread Connections are identical, the only different is Upside valuation of Airthread Connections included the impact of synergies. The first steps in valuation is to estimate the free cash flows in it's present value. Next is to predict the AirThread Connections operations' terminal value on a going concern basis and treat the company as a perpetuity and then follow by determine the interest tax subsidy in present value. After that by using the equity in earnings of affiliates and Price Earning ratio to calculate the non-operating investments in equity affiliates. The final steps is to calculate the enterprise value in the final valuation and terminal value calculation after valuing the total operating assets in its present value.

Analysts estimate that the $80 million in cost saving could be realized after the acquisition , however certain other costs associated with the integration approximately $130 million would occur .Hence, I take these cost savings and integration costs into consideration for the with-synergies valuation. Incorporating the effects of 80million cost savings for the merged firm (to be achieved by end of 2007 and assumed to incur in perpetuity then on) and 130 million integration costs (half of this accounted at the beginning years) in the estimated EBITs for Torrington, a new horizon value is estimated, the new FCF is discounted by acquiring company’s WACC 8.39%. Torrington company’s with- synergies valuation $1386.38 million exceeds the value as a stand-alone entity by approximately $286 million. sheet2: With-synergies Valuation of Torrington-DCF Method.

The previous 959.6m Amoco shares will convert into 633.336m shares of BP ADS equivalent, with the previous 965.6m ADS shares, BP shareholders will take part 60% of the new company, still have majority control over the firm. In this deal, we paid for about 20% premium, which is quite standard and normal. Because synergies from revenue and chemical divisions’ combination are not estimated nor not expected to bring benefit, the main synergy from the merge is 2 billion dollars saving of pretax operating cost. The value we create for our shareholders is $14,840.06 million (Amoco stand-alone value $46,430 million+ synergy $2 billion – price paid for Amoco $33,538.94). But this number is quite sensitive to a lot of factors, such as future energy demand, oil and gas price, industry growth potentials, ultimately affecting Amoco’s stand-alone and synergy valuation. Please

Perhaps the easiest approach to the acquisition of BoatU.S. is to leave BoatU.S.’s current demand and forecast planning untouched and separate from West Marine’s planning processes. This would be inexpensive and non-disruptive to the current corporate culture. The drawbacks, however, could be a slow steady decline in profitability and reliability of the BoatU.S. brand, hence the reason for the acquisition in the first place.

We valued the company using four different methods; Net Present Value, Internal Rate of Return, Modified Internal Rate of Return and Profitability Index. We began with the Net Present Value, or NPV, calculation. NPV values an investment’s profitability based on the projected future cash inflows and outflows of the investment, discounted back to present value using the WACC. The calculations for NPV are presented in Appendix 2. We started by separating cash inflows and outflows by each year. We used Bob Prescott’s estimates for the revenue per year and related operating costs of cost of goods sold as

As we know, Atlantic Corporation was considered as one of the nation’s largest forest products producer, its operations in the linerboard industry have not been strong. Hence, if Atlantic purchased Royal’s Monticello mill, it would increase its profit margin greatly. Additionally, it was expected that 1984 would be a healthy year for this industry, the chances got higher again that Atlantic could position well in the overall industry.

It is determined that the company worth is $856,518 with a share price of $351.03 per value as per the discounting dividend cash flow valuation approach..In appraising the anticipated premerger performance of the company, the weighted average cost of capital is computed; the worth of the WACC for FVC is 9.2% as depicted in

above, how much should CSX be willing to pay for Conrail? Support your answer with appropriate analysis. According to operating income gains we can value a firm’s market price as its pre-merger value and the present value of gains in operating income. Let’s assume that value of Conrail before the merger is equal to its market cap. Then taking Conrail share price as $71.94 (average of year end and high stock price) and number of shares outstanding as 90.5 million shares (Exhibit 6) we get Conrail market value equal to $6,510.57 million ($71.94 x 90.5 million). We assume G =3%, MRP = 7%. We take risk free as 30-year maturity US Bonds rate, which is 6.83% (Exhibit 8); merged CSX-Conrail equity beta as average of CSX and Conrail equity betas, which is 1.33. rE = rf + MRP βE = 6.83% + 7% x 1.33 = 16.11% Now we can find Conrail’s synergy value as present value of gains in operating income. 1997 Total Gain in Operating Income Total Gain in OI after 40% Tax Gain in OI (discounted @ rE) $ $ $ 1998 $ 88 $ 12.80 $ 7.15 $ $ $ 1999 396 237.60 176.26 $ $ $ 2000 550 330.00 210.84 2001 $ 567 $ 340.20 $ 187.21