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Università di Torino
Facoltà di Economia
Course of Business Combination

Exercises
November 2012

Exercise 1

Question and Assumptions

• Please estimate the Enterprise Value (EV) of “Company Alpha” (total and per share) by applying the market comparables on page 3.

• Main Financial Data of “Company Alpha”
– EBITDA per Share 2013: €4.40
– EBITDA per Share 2014: €5.70
– Sales per Share 2013: €18.10
– Sales per Share 2014: €22.20
– Total Shares Outstanding: 8,250,000

2

Exercise 1 (cont’d)

Note
1.
Global luxury/brands average excludes Brunello Cucinelli, Hermes, Michael Kors, Prada and Salvatore Ferragamo

3

Exercise 2

Question and Assumptions

• Based on the assumptions below and on key financials of page 5:
- Please estimate the NPV as of 1 Jan 2012 of the Cash Flows in 2012, 2013 and 2014, including the
Terminal Value

• Main Assumptions
– WACC: 10%
– Terminal Multiple on Cash Flow: 5x
– Capital Expenditure 2012: €0 MM
– Capital Expenditure 2013: €130 MM
– Capital Expenditure 2014: €0 MM

4

Exercise 2 (cont’d)

Key Financials
€MM

2012E

2013E

2014E

Sales

660

710

770

Operating Expenses

400

430

450

Depreciation

70

70

80

Tax

75

80

85

5

Exercise 3

Question and Assumptions

• Based on the assumptions below for a merger transaction and on the key financials reported on page 8:
– What is the Acquirer’s 2013 EPS accretion/ dilution in the event of a transaction 60% in shares and 40% in cash (financed by debt) assuming a 25% premium on market capitalization?

• Main assumptions
– Premium on market capitalization: 25%
– Pre-tax market cost of debt: 6.0%
– Tax rate: 32%
– No synergies
– No integration costs

6

Exercise 3 (cont’d)

Acquirer
2011A

No. of Shares Outstanding (MM)

2012E

2013E

2014E

150

Share Price (€)

60

EPS (€)

6.0

7.0

8.0

8.5

10.0x

8.6x

7.5x

7.1x

2011A

2012E