flow of presentation objective. history. reasons for merger; a) strategic analyses b) technical...
TRANSCRIPT
Flow of Presentation
Objective. History. Reasons for Merger; a) Strategic Analyses b) Technical Analyses Valuation. Funding Current Scenario Conclusion.
Objective
Learning Process of M&A.Know how to do valuation.How to make profit my learning
M&A.
Overview of companies
Cincinnati Based Established in yr.1837 Work force : 110,000 Market Capitalization :$141
bill. Suppliers : 85000 Manufacturing plants : 106
in 41 countries. Pre-acquisition revenues
(2004) : $51 bill.
Boston based Established in yr. 1895 Work force : 29400 Market capitalization : $45
billion. Suppliers : 26000 Manufacturing plants : 31
in 14 countries. Pre-acquisition revenues
(2004) : $9.8 bill.
Strategic Analysis
Marketing Approach Global Regional
Culture Innovative Social -Responsibility
+
+
Synergy
Economy of Scale
P&G can havebenefits from theGillette R&Dstructure and use itsBrand Loyalty
P&G can have benefits if they adopt an HYBRID STRUCTURE ; But every change require some cost and they have to do INTEGRATION EFFORT.
Risk in Merger :
Technical Analysis
Sales & Growth RatioProfit MarginLeverageConclusion.
Sale
Sale Growth Rate
Operating Profit Margin.
Debt to Equity Ratio.
Assumption about sale's growth
% of net
sale2004
sales' growth in 2005
Weightage growth
% of projected sales 2005
sales' growth after 2005
Weightage sales' growth
Blades & Razor
41.32% 14.00% 5.78% 41.15% 12.00% 4.94%
Duracell 21.30% 9.00% 1.92% 20.28% 10.00% 2.03%
Oral Care 15.17% 25.00% 3.79% 16.57% 25.00% 4.14%
Braun 13.04% 15.00% 1.96% 13.10% 15.00% 1.97%
Personal Care
9.17% 11.00% 1.01% 8.89% 11.00% 0.98%
Total100.00
% 14.46% 100.00% 14.05%
Assumption about EBIT margin
% PFO2004
PFO‘ growth in 2005
Weightage PFO 's growth
%of projected PFO 2005
PFO'growth after 2005
Weightage PFO ' growth
Blades & Razor
63.68% 30.00% 19.10% 65.97% 30.00% 19.79%
Duracell 19.16% 22.00% 4.22% 18.63% 22.00% 4.10%
Oral Care 9.73% 14.50% 1.41% 8.88% 14.50% 1.29%
Braun 3.71% 10.50% 0.39% 3.27% 10.50% 0.34%
Personal Care
3.72% 10.00% 0.37% 3.26% 10.00% 0.33%
Total 100.00% 25.49% 100.00% 25.84%
Assets to Sale 2004 2003 2002 2001
Operating Working Capital ($mill.) 0.00 170.00 708.00 1333.00
Operating Working Capital as %of sale NA 2.00% 8.00% 16.00%
Net Long term assets 5731.00 5614.00 4968.00 4979.00
Net Long term assets turnover 1.83 1.65 1.70 1.62
Capital expenditures ($mill.) 616.00 408.00 405.00 624.00
Capital expenditures % net sales 6.00% 4.00% 5.00% 8.00%
Valuation
Individual Valuation of Firm
Valuation After Acquisition
Assumption for the Valuation
2005 After 2005
Sales' Growth Rate 14.86%14.05%
EBIT Margin 25.49%25.85%
Tax Rate 30.00%30.00%
Operating Working Capital to sale 1.00%1.00%
Net Long term Assets to sale 60.00% 60.00%
FCFF Valuation Method.
FCFF = NOPAT + depreciation & amortization
– changes in NWC – Capex
Discount Rate = WACC.
Dream Deal
Total Deal Value : $57 bn Market Cap. : $48bn
@ 18% Premium
.975 P&G Share = 1 Gillette Share
Issued 962mn shares
Issued 79mn stock options
Buyback $22bn of shares
Investment Banker : Goldman Sachs & UBS AG