Evaluating Valuation PropositionConsumer Electronics

Discounted Cash Flow
The Chairman of [company name] has been presented with an interesting prospect. The company very recently received an unsolicited all-cash offer for a sweet-sounding $145 million from a similar-sized competitor based in the US. Before presenting to the rest of the Board, he would like advice on how to proceed.

challenges

The client realizes that he should take a position one way or another. He has asked for Invexstar’s help in assessing at least these three following options:

  • Urge fellow shareholders to accept the bid
  • Urge fellow shareholders to reject the bid
  • Suggest that the bid be put off, and engage sell-side advisors to run a formal process.

deliverables

An excel spreadsheet that includes:

1. Complete financial statements
2. Valuation model of the company

Also, a deck that includes:

1. An overall opinion on the proposition as well as the pros and cons of each option;
2. Projections of the company’s financials to gauge growth, margins, and understand where we might be headed;
3. A single slide overview of the market/industry landscape;
4. An explanation of the valuation, making clear any additional assumptions you made to derive it;
5. Qualitative advice on how to best proceed.

results

An unsolicited all-cash offer of $145 million from a similar-sized competitor based in the US. Converting it to GBP, implies 107.4 million GBP (FX rate 1.35 USD/GBP).

Options to consider:
1. Accept the bid
2. Reject the bid
3. The bid be put off, and engage the sell-side advisors to run a formal process

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Deck

Excel Model

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