Flinder Valves
Flinder Valves and Controls Inc. Acquisition
BACKGROUND
In early May 2008, talk began between president of Flinder Valves, Bill Flinder and Tom Eliot, chairman and CEO of RSE about a possible acquisition of Flinder Valves by RSE. The industrial manufacturing industry had taken a hit due to rough economic times and the acquisition made sense. Both leaders were very concerned about the challenges and risks of the deal. Flinder was a company that engineered and manufactured specialty valves and heat exchangers. These products required extensive research and development and they were one of very few firms working in these types of applications. A bullk to FVC’s sales came from defense and aerospace applications. They were known for their prime contracts and engineering excellence. Sales have continually grown for FVC and from 2007 to 2008 they jumped up over 23%. After going public in 1996, Auden, a distributor for FVC came to them with proposals of a merger but a deal was never made. FVC has been approached by numerous firms but no deals have gone through. Lately, FVC has drawn more attention from us with the disclosure of their new project, the widening gyre. We feel as though if this technology takes off and is applied could bring value ranging from $5 to $15 million.
VALUATION
From RSE’s analysts and accountants due diligence, we have come to the conclusion that we believe FVC to be valued around $186.4 million. Our procedures for coming up with this value was based on the sales projections from 2008-2012 that FVC has provided for us. We used a discount rate of 3.2%. The percentage used was based on the growth rate of GDP and what numerous other sites suggest the industrial manufacturing industry is growing at. We are also under the assumption that FVC’s cash flow projections are correct. However, we are very skeptical of FVC’s projected growth. From 2003 to 2007 their sales increased by a total of 36% over the period. Their projections from 2008 to
BACKGROUND
In early May 2008, talk began between president of Flinder Valves, Bill Flinder and Tom Eliot, chairman and CEO of RSE about a possible acquisition of Flinder Valves by RSE. The industrial manufacturing industry had taken a hit due to rough economic times and the acquisition made sense. Both leaders were very concerned about the challenges and risks of the deal. Flinder was a company that engineered and manufactured specialty valves and heat exchangers. These products required extensive research and development and they were one of very few firms working in these types of applications. A bullk to FVC’s sales came from defense and aerospace applications. They were known for their prime contracts and engineering excellence. Sales have continually grown for FVC and from 2007 to 2008 they jumped up over 23%. After going public in 1996, Auden, a distributor for FVC came to them with proposals of a merger but a deal was never made. FVC has been approached by numerous firms but no deals have gone through. Lately, FVC has drawn more attention from us with the disclosure of their new project, the widening gyre. We feel as though if this technology takes off and is applied could bring value ranging from $5 to $15 million.
VALUATION
From RSE’s analysts and accountants due diligence, we have come to the conclusion that we believe FVC to be valued around $186.4 million. Our procedures for coming up with this value was based on the sales projections from 2008-2012 that FVC has provided for us. We used a discount rate of 3.2%. The percentage used was based on the growth rate of GDP and what numerous other sites suggest the industrial manufacturing industry is growing at. We are also under the assumption that FVC’s cash flow projections are correct. However, we are very skeptical of FVC’s projected growth. From 2003 to 2007 their sales increased by a total of 36% over the period. Their projections from 2008 to