A group of private equity financiers need to assess the worth of the leveraged takeover of a Yellow Page Business that was functional in the United States and the United Kingdom. In order to reach valuation, they must struggle with the matters of deciding how to carry out valuations across national borders and how to estimate a steady cash cow business in addition to a growing business. The case evaluates and looks at the economics and the motivation of carried interest and analyzes the valuation models: Capital Cash Flow and Free Cash Flow.
CCF and Discounted CCF for US and UK Businesses, Terminal Value Calculations for US and UK, PV of Terminal Value, Discount Rates for UK and US, APV for Yell Group, Betas for UK and US, Unlevered Return on Equity.
How much is Yell worth? How much would you bid?
How much is the “carry” worth to PE investors?
What are the key value drivers of the Yell Group?
Is Yell a good LBO candidate?
Why is BT selling the directories business?
How similar are the US and UK businesses?
What are the issues when valuing the two businesses in two different geographies? How much should Apax/Hicks Muse pay for the global business?
How does Yell’s projected debt affect its valuation?
How does the cross-border nature of the Yell deal affect the calculation of the firm?
How much is Yell worth? How much would you bid? (For your cash flow projections, you can rely on the forecasts prepared by the case writer in Exhibit TN1-TN3)
Should the Apax/Hicks Muse team trust the management projections? Why (not)?
If you were Apax/ Hicks Muse would you do the deal?