1.Executive Summary The case study has been approached from different valuation methods to ascertain if there is value in the acquisition of Southern Comfort. These methods all yield the same result, i.e. Southern Comfort is expensive at the asking price of $94.6million. The valuation methods also examined the reasonableness of the acquisition using methods such as Free Cashflow Analysis, Book Value methods and Price Earnings ratios analysis The qualitative aspects have also been analysed to find out if there is value from a qualitative perspective. Methods such as SWOT analysis have been utilized to check if there would be a ‘perfect fit’. A perfect fit is basically an analysis that the acquisition will bring synergy between the two …show more content…
The acquisition of SC has also the potential to add on unique liquor which is mixed by a secret formula and has exclusive rights which (see Appendix?) have a huge synergic benefit to the present BF product mix-line offerings and brand equity. Besides, SC has strengthened channels of foreign distribution and tremendous brand growth in 1977 compared with competitor brands in the same product line. Because SC is not aggressively marketed and that it is wrongly positioned market, because they think it is a whiskey. If acquired, SC could bring in the foreign penetration capabilities and know-how to BF. If aggressively marketed and repositioned SC could add a lot of vale to BF too. SC also has a well reputable brand offering and the management is well run and efficient, equal to that of BF thus the acquisition of SC would fit well in BF style of management philosophy. SC also has modern equipment which is an asset that could strengthen the asset base of BF and could be used in the continued production of SC without replenishing the asset in the foreseeable future and/or tries to adopt the production of SC to BF product line systems and standards. Thus the operational strategic competitive position of BF could be enhanced. That could also improve agility or obtain resources that are vital to future prosperity of the SC in particular and BF in general. The two firms resemble each other in
Management of Billy’s made several assumptions towards its newly acquired company, Little Drummer Boy. Management finally adopted the assumptions that the fair value of significant assets acquired was $865 million and that of other assets was $145 million. At the same time of the acquisition, management also decided that useful lives of the acquired plant and equipment were 30 years and 15 years, respectively, which were different from the 20 years and 10 years useful lives for the previously owned plant and equipment. Furthermore, management determined a useful live of 15 years for the acquired customer list. Regarding the $865 million assumption, auditors only adopted the procedure to compare the percentage used to
2) If you were the responsible manager at the ASIC Division, would you accept Western's offer?
For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.
1. Why is Brown Forman considering buying Southern Comfort? In your answer consider the strategic motives of Brown and the arguments in favour of and against the acquisition.
1. Perform analysis on the historical financial statements of Brown Forman. Evaluate the financial health of Brown Forman. Here you should perform ratio and trend analysis, along with creating common-sized financial statements. Assess the overall financial health of Brown Forman prior to the proposed purchase of Southern Comfort.
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)
For calculations of the acquisition price, the P/E is taken to be 8.6. The acquisition price is calculated by multiplying this value with the historical average of net income. Thus, the acquisition price comes out to be $186,215,800, which is $189,186,673 less than the enterprise value.
As the manager of Starshine (SS) in the M&A in Wine country, the company has faced a dilemma of merge with a similar size company- Bel Vino (BV) or being acquired by the large industrial corporate- International Beverage (IB). This report valuate the deals and make judgement by evaluation. Finally, it will identify some issues related to the game.
The following case analysis portraits the use of capital asset pricing model to compute the weighted average cost of capital for Marriott and each of its divisions. The flow of events below is following a string of different evaluations, each of which is assessed separately.
To facilitate the valuation aspect of the analysis, free-cash-flow forecasts are provided in case Exhibit 10 for Hershey as a stand-alone entity. Most students should find it easy to calculate a value for Hershey using the discounted-cash-flow (DCF) method and industry-comparable multiples, which also are provided. As with any valuation case, students must make judgments about the appropriate capital structure, the weighted average cost of capital (WACC), sales growth, and the terminal growth rate. Once students have explored the value drivers for Hershey though sensitivity analysis, they may then evaluate the bids from both Nestlé S.A.–Cadbury Schweppes PLC (NCS) and the Wm. Wrigley Jr. Company. They will want to examine whether the bids are fair from the perspective of HFC shareholders and whether the synergies assumed by the bidders in their offer prices are reasonable.
Both companies operate and compete in same business and therefore, Timken is seeking substantial operating synergies from this largest acquisition in its history. The motive behind this acquisition is to add potential value to Timken by combining both firms, preferably from operational sources.
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
Grappling with the potential purchase of Olive Hill Farm, we decided to conduct a financial analysis to determine whether the project should be taken or not. Our financial analysis include scenarios for the best, worse, and most likely outcomes of purchasing the farm. For each scenario a Net Present Worth (NPW) and an Internal Rate of Return (IRR) was calculated and compared. This revealed that there was little gain for the worst case scenario and large gains for the other two scenarios. A sensitivity analysis and a break-even analysis was also conducted. The sensitivity analysis identified the most influential factors on the NPW. In the end, the analysis favored buying Olive Hill Farm because it would be a low risk, high reward investment.
* For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.
2. When an acquisition takes place, there is usually a lot of concern on behalf of all the company’s employees. Not only the company that is being acquired also by the company that is doing the acquisition. Usually there will be jobs lost, consolidation of positions, promotions, demotions, etc. It is the responsibility of the Human Resources Department to ensure