The managerial team of Mammoth Inc. is contemplating if it can buy the Robertson Tool Company and the worth that the buyout would result in. valuation for the project could be computed using different methods, which include a DCF with WACC analysis, impact on EPS and market multiples. The case will also entail that the student takes into account how the proposal should be chalked out and put into action. Key concepts covered include: Acquisition, DCF Analysis, Market Multiples Analysis and Revenue Forecasting, Margin Improvement, Valuation, EPS Analysis, Stock Offer, Weighted Average Cost of Capital, and Bidding Contest.
Discounted Cash Flow Valuation
EBIAT, Free Cash Flows, PV of Cash Flows, Terminal Value (W-1), Total Value of the Company
Total Value of Equity, Intrinsic Price per Share
Working 1: Terminal Value Calculation, PV of Terminal Value
Cost of Capital Calculation
Cost of Debt Calculation, Cost of Equity Calculation
EBIAT Multiple, Price/Earnings, Share Price
What is the maximum price that Monmouth can afford to pay, based on a discounted cash flow valuation? calculation of WACC and terminal value determination? Based on market multiples of EBIAT?
Why is Simmons eager to sell its position to Monmouth for $50 per share? What are the concerns of and alternatives for each of the other groups of Robertson shareholders?
What offer would you make in an effort to gain the support of the Robertson family and the great majority of the stockholders, while improving the long-term trend of Monmouth’s earnings per share over the next five years?
If you were Mr. Vincent, executive vice president of Monmouth, Inc., would you try to gain control of Robertson Tool in May 2003?
The administration of Monmouth asked advice on how to design, as well as the implement, which was successful bid for the purchase of tools Robertson.
What or how would your advice? Please justify your answer.