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Corporate Finance – MBA 8020 Summer 2016 Palamon Capital Partners/Team System S.p.A Introduction: Palamon Capital Partners is a generalist private equity firm that invests in existing companies that are not mature, and operates in the United Kingdom, and founded in 1999 with initial raised funds of EURO 440 Million. The company aims 35% return on a single portfolio investment, and 20-25% blended portfolio net return. The firm’s plan is to gain control of shares in the companies after thorough screening process, and an investment possibility of approximately six years with a carefully planned exit strategy. The company doesn’t focus only a certain industry or country, and promises to provide both management…show more content…
So, using the assumptions above, free cash-flow can be determined as shown below: FCF = NOPLAT – Net Investment in IC, NOPLAT = EBITA x (1 – T) Net Investment in IC = Change in Operating Working Capital + PPE. Operating Working Capital Operating Current Assets - Operating Current Liabilities = (51% - 37%= 16%) Total Sales PPE = Land, PPE + Other Tangible Assets. Continuing value 2007 = FCF 2008/ (WACC – g) = FCF 2007 x (1 +g)/ (WACC – g) = 97,414 ITL millions (after including discount factor 14%). Value of operation = Present value of FCF 2000-2007 + Continuing value = 183,062 ITL. Also, the value of equity = value of enterprise – value of debt = 137,062 ITL. Therefore, the 51% TeamSystem’s shares Palamon Capital is considering to buy = Value of equity x 51% (LIBRA) = 69,902 ITL. And using the exchange rate on 1 January, 1999 =ITL/EUR = 1936.27. 51% equity in EUROS = 36.10 EUROS. (All currency in millions). Operating Costs as a percentage of sales: | | Average percentage sales | | Estimates used | Cost of Materials | | 25.26% | | | Cost of service | | 21.46% | | | Rent and leasing | | 1.81% | | | Total operating Costs | | 48.54% | | 45% | Salaries | | 12.26% | | | Social contributions | | 4.14% | | | Other personal costs | | 1.16% | | | Total
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