Palamon Capital Partners/Teamsystem S.P.A.

Palamon Capital Partners/TeamSystem S.P.A. 1. Valuation of TeamSystem S.P.A. using Free-Cash-Flow-to-Equity Model (FCFE) (1) Calculate Free cash flow to equity per year:
FCFE = NI – (CAPX – DEPR) –NWC + Net Borrowing (2) Discount Rate / Equity Rate:
Elson estimated discount rate to be 14%. (Source: Elson believed that a 14 percent discount rate would appropriately capture the risk of the cash flows.) (3) Present Value:

Note: the company is expected to grow by 6% forever since 2003. (Source: Exhibit 8) (4) Calculations: Table1 & 2 (5) Conclusion:
The 51% of equity value is ITL 68.401 billion, over the investment EUR 25.9 million (ITL 50.235 billion). So, this investment is recommended.

2. Valuation of TeamSystem S.P.A. using multiple-based valuation (P/B multiple) (1) Price-to-book Ratio:

(2) Industry Profile: Middle Market Accounting Software Companies | Market Value of Equity | Book Value | P/B multiple | Great Plains Software Inc. | 767893 | 133193 | 5.77 | Intuit Inc | 6476010 | 1673405 | 3.87 | Epicor Software | 154977 | 122196 | 1.27 | Sage Group PLC | 5997648 | 11187 | 536.13 | Symix | 84421 | 36749 | 2.30 | Median | | | 3.87 |

(3) TeamSystem S.P.A. P/B multiple | 3.87 | Book Value of TeamSystem S.P.A. in 1999 (ITL millions) | 30,124 | Equity Value (ITL millions) | 116,579 | 51% of Equity Value (ITL billions) | 59.455 |

(4) Conclusion:
The 51% of equity value is ITL 59.455 billion, over the investment EUR 25.9 million (ITL 50.235 billion). So, this investment is