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Bonneau’s Company

Introduction:
Bonneau’s Company was an organization involved in the business of selling Sunglasses. The Business
was seasonal, due to which there was low Profit during that season however, in order to overcome this
weakness the company’s management decided to enter into a non-prescription reading glasses industry
by acquiring Pennsylvania Optical, which was located in Reading. This acquisition was viewed as a one
which would enable it to start selling a Product which had less seasonal fluctuation and also the
acquisition would deliver the benefit of obtaining revenue and marketing synergies. Subsequently, the
firm was acquired and the benefits were obtained as intended, helping the company to double its Sales
over the years.
Recently, the company had 25 years of Success due to which it had a mass marketing approach to
appeal to large segment of customers. However, as the company move on with its success, it set its eyes
on a new acquisition target known by the name of “Foster Grant Corporation”.
Foster Grant Corporation was not only involved in the business of selling Sunglasses but it also
manufactured them along with the Production of Plastic Material.
For this transaction, the company decided to use the same Bank for financing it however, as it was a
complex situation, so the company had to decide about the Offer Price and the feasibility of obtaining
finance from the bank.
Benefits of Acquiring Foster Grant Corporation:
Acquiring Foster Grant Corporation would yield the following benefits:
1. By acquiring the company, it would be able to obtain the valuable assets of the company which
were as follows:
a. The brand name of the company was considered highly valuable in the glasses industry.
b. The technical division in the company had the highest quality and efficient Production.
c. It had a low cost Producing manufacturing facility.
d. It holds a number of Patent rights, which give to access to a number of good quality
technologies responsible for the Production of good quality Products.
e. It Sales and services division was very good.
f. It had one of the best human resources with good qualification, experiences and
commitment.
2. With the acquisition of this target, the company can exploit the following opportunities:
a. The company can expand and increase sales in the areas of Sunglasses, Reading glasses and
technical Products.
b. It can also expand into international location for sale.

Recommendation about the Investment and Financing:
According to the Calculations made in Appendices, two methods for valuation were applied, First the
liquidation method would value the company on the basis of how much its asset would be sold off if the
company was to be liquidated, and Secondly, the Cash flow based method discounted the future earning
from the operation to arrive at a value which would be calculated on the basis of if the company was to
be a going concern.
The results were obtained as follows:
Liquidation value: 9 million
Cash flow value: 7 million
Thus, it could be seen that Liquidation value was higher than the Cash flow value however, as the
company intends to acquire it for a purpose of earning cash flow from its operations, so it should be
acquired for a Price of 7 million.
Similarly, the sensitivity analysis of Sales and Operating Profit margin was carried out and it was
determined that the Sales were the most risky factor as it had a very low sensitivity to the Value of the
company.
In addition to that, the technical feasibility of taking the loan was also considered and it was assume that
if the company was to be acquired for at 9 million, so how it could affect the leverage level of the
organization and it was concluded that if it was acquired while taking a loan then the debt to equity
would rise from 16% to 50%, hence making it not feasible for the company to take the loan and also it
could be seen from its operations, which were not that much profitable in order to bear the expenses of
interest commitment.
Overall, the acquisition promises some Profitable Outlook however, the acquisition should be partly
financed with some private Equity.