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Prior to finishing the final offer, Simpson's M&A team has a discussion with NPV Advisory. You were asked to provide a combined valuation for the new company based on the information below. Table 1. Simpsons stores local Sales (2 locations) Operating Costs Operating Income Depreciation and Amortization EBITDA Net debt of the company Table 2. RaTrade Sales (20 locations) Operating Costs Operating Income Depreciation and amortization 2017A EBITDA Net debt of the company 2017A 2018A 6.00 -4.20 1.80 1.00 ? 2018A 120.00 -90.00 30.00 5.00 ? 56.00 2019F 10.00 -6.60 3.40 1.20 ? 20.00 2019F 134.00 -104.50 29.50 4.50 ? 17.00 -11.50 5.50 1.50 145.00 -111.70 33.30 6.00 1) What is the expected valuation of the Combined Company based on EBITDA ignoring all the discounts and premiums? 2) If the offer price by the Simpsons was $165M for 100% of equity, what is the upside for the buyer in dollars and as a percentage, if the new company will be valued at an international EV/EBITDA ratio of 6?

Prior to finishing the final offer, Simpson's M&A team has a discussion with NPV Advisory. You were asked to provide a combined valuation for the new company based on the information below. Table 1. Simpsons stores local Sales (2 locations) Operating Costs Operating Income Depreciation and Amortization EBITDA Net debt of the company Table 2. RaTrade Sales (20 locations) Operating Costs Operating Income Depreciation and amortization 2017A EBITDA Net debt of the company 2017A 2018A 6.00 -4.20 1.80 1.00 ? 2018A 120.00 -90.00 30.00 5.00 ? 56.00 2019F 10.00 -6.60 3.40 1.20 ? 20.00 2019F 134.00 -104.50 29.50 4.50 ? 17.00 -11.50 5.50 1.50 145.00 -111.70 33.30 6.00 1) What is the expected valuation of the Combined Company based on EBITDA ignoring all the discounts and premiums? 2) If the offer price by the Simpsons was $165M for 100% of equity, what is the upside for the buyer in dollars and as a percentage, if the new company will be valued at an international EV/EBITDA ratio of 6?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Prior to finishing the final offer, Simpson's M&A team has a discussion with NPV Advisory. You were asked to provide a combined valuation for the new company based on the information below. ? Table 1. Simpsons 2017A 2018A 2019F stores local Sales (2 locations) 6.00 10.00 17.00 Operating Costs Operating Income -4.20 -6.60 -11.50 1.80 3.40 5.50 Depreciation and Amortization 1.00 1.20 1.50 EBITDA ? Net debt of the 20.00 company ? Table 2. RaTrade 2017A 2018A 2019F Sales (20 locations) 120.00 134.00 145.00 Operating Costs -90.00 -104.50 -111.70 Operating Income 30.00 29.50 33.30 Depreciation and 5.00 4.50 6.00 amortization EBITDA ? Net debt of the 56.00 company 1) What is the expected valuation of the Combined Company based on EBITDA ignoring all the discounts and premiums? 2) If the offer price by the Simpsons was $165M for 100% of equity, what is the upside for the buyer in dollars and as a percentage, if the new company will be valued at an international EV/EBITDA ratio of 6?
Transcribed Image Text:Prior to finishing the final offer, Simpson's M&A team has a discussion with NPV Advisory. You were asked to provide a combined valuation for the new company based on the information below. ? Table 1. Simpsons 2017A 2018A 2019F stores local Sales (2 locations) 6.00 10.00 17.00 Operating Costs Operating Income -4.20 -6.60 -11.50 1.80 3.40 5.50 Depreciation and Amortization 1.00 1.20 1.50 EBITDA ? Net debt of the 20.00 company ? Table 2. RaTrade 2017A 2018A 2019F Sales (20 locations) 120.00 134.00 145.00 Operating Costs -90.00 -104.50 -111.70 Operating Income 30.00 29.50 33.30 Depreciation and 5.00 4.50 6.00 amortization EBITDA ? Net debt of the 56.00 company 1) What is the expected valuation of the Combined Company based on EBITDA ignoring all the discounts and premiums? 2) If the offer price by the Simpsons was $165M for 100% of equity, what is the upside for the buyer in dollars and as a percentage, if the new company will be valued at an international EV/EBITDA ratio of 6?
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