MID TERM EXAMINATION 2020

FINANCIAL ANALYSIS OF CORPORATE DEALS

Time – 2 ½ hrs

Name…ANIRUDH CHAUHAN………………

(Show your workings properly.

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Q1. Provide the following information on the Merger

Classify the Acquisition
Type of Synergy (Choose the right answer)
Tax implications of the Deal
Based on Value Chain
Based on Economic Area
Based on Relationship
Based on Investment Strategy
Based on Earning Performance
Operating/Financial/Managerial
Modular/Reciprocal/Sequential
Taxable/Non-Taxable

Q2 Estimate the value of DMS using multiple method

Enterprise Value based on EBITDA 110.320192942559
Equity Value
110.320192942559

Control Premium (Assume 30%)/Minority Discount 33.0960578827678

Illiquidity Discount (Assume 35%) 0
Synergy Premium (Assume 12%) 13.2384231531071
Fair Market (Adjusted) Value of DMS 156.654673978434

Q3 Calculate the value of Synergy

Cash Flow 2022
Revenue synergy -22.715
Cost Synergy
Cash Flows From Synergy 0.990643750000001
Cost of Capital
Value of Synergy

Q4. Based on the synergy calculated above, please determine the value per share of DMS
Market Price of DMS share
Synergy Value
Value Per Share

Q5. If the deal could be settled at 25% premium for shares of DNS then calculate the followings
Swap Ratio (Based on Market Price)
Synergy gain to DMS
Synergy gain to DMS

Q6. Based on the swap ratio calculated above ascertain whether the deal be accretive or dilutive?
 N 2020
PORATE DEALS
Marks – 30

Roll No…19P186……

perly.
gle Classroom)

(04 Marks)
Horizontal
Domestic
Friendly
Economies of scale

Operating
Reciprocal
Non-taxable

(04 Marks)

Debt is assumed 0 because interest is 0

in 2021 and also long term debt is 0 as
the loan taken is only for working
capital

Because the firm DMS is listed

(8 Marks)
2023 2024 2025 2026
-43.9472499999999 -39.1990524999999 -33.6363447249999 -27.2159121252498

3.61930125 4.588762666875 6.8018484136125 8.81172875246962

are of DMS (4 Marks)

e the followings (4 Marks)

cretive or dilutive? (6 Marks)

DMS 2017 2018 2019 2020 2021 E 2022 2023
Net sales 289.9 304.1 316.4 329 345.5 362.775 380.91375
Gross profit 30.5 31 32.3 33.7 35.1
Op expenses 20.9 21.6 26.7 28.6 30.3
EBITDA 9.6 9.4 5.6 5.1 4.8
EBITDA margin 3.31% 3.09% 1.77% 1.55% 1.39%
2.22%
EBIT
D&A

ABC PQR TDH

Sales 13945.7 6417.2 836.9
0.0222238591 0.0222238591 0.0222238591
EBITDA 309.92727158 142.61494849 18.599147664
Market cap 6186.9 3151.7 500.1
EBITDA multiple 19.962425276 22.099366394 26.888328918
22.98
Eq beta 1.69 1.25 1.56
1.5

Debt 8.889
 2024 2025 2026
399.9594375 419.95740938 440.95527984

WACC
11.41
Exhibit 1 DMS's Simplified Financial Statements, 2017-2021 ( $ millions)
 Period ending 31st March 2017 2018 2019
Income statement
Net sales 289.9 304.1 316.4
COGS 259.4 273.1 284.1
Gross profit 30.5 31 32.3
Operating expenses 20.9 21.6 26.7
Depreciation and amortization 1.6 1.6 1.7
Operating profit 8 7.8 3.9
Interest expense* 0 0 0.3
Income taxes 2.8 2.7 1.3
Net income 5.2 5.1 2.3
EPS $1.30 $1.27 $0.58
Dividend $0.20 $0.20 $0.20
NWC

Computation of FCFF for DMS as per Case Facts

Year Ended 2022 2023 2024
NOPAT 3.54 4.95 6.50
Depreciation 2.10 2.40 2.70
Capex 3.63 3.81 4.00
Delta NWC 1.3 -0.63485625 0.4380508125
FCFF 0.71 4.18 4.76

Broadway ($ millions)
2017 2018 2019

Net sales 137.8 143.5 149.5

COGS 126.1 131.5 137.1
Gross profit 11.7 12 12.4
Operating expenses 2.9 2.9 2.9
Depreciation and amortization 1.8 2.2 2.5
Operating profit 7 6.9 7
Interest expense* 0.4 0.4 0.4
Income taxes 2.3 2.3 2.3
Net income 4.3 4.2 4.3
EPS $1.23 $1.21 $1.22
Dividends $0.24 $0.24 $0.24

2022 2023 2024

EBITDA 9.47 8.52 10.01
NOPAT 4.14 3.40 4.23
Depreciation 3.10 3.30 3.50
Capex 3.06 2.75 3.00
Delta NWC 0.4 0.4 0.4
FCFF 3.78 3.54 4.33
 Forecast As per Case Facts
2020 2021 [E] 2022 2023 2024 2025 2026

329 345.5 362.78 380.91 399.96 419.96 440.96

295.3 310.4
33.7 35.1
28.6 30.3
1.7 1.8 2.10 2.40 2.70 3.00 3.30
3.4 3 5.44 7.62 10.00 12.60 13.23
0.2 0 - - - - -
1.1 1.1
2.1 2
$0.52 $0.49
$0.20 $0.20
24.09425 25.39425 24.75939375 25.197444563 25.197444563 24.252540391

2025 2026
8.19 8.60
3.00 3.30
4.20 4.41
0 -0.94490417109
6.99 8.43

2020 2021 [E] 2022 2023 2024 2025 2026

155.3 161.9 145.71 131.14 142.94 155.81 169.83

142.5 148.6
12.8 13.3 12.39 11.15 12.86 14.02 16.13
3 3 2.91 2.62 2.86 3.12 3.40
2.8 2.9 3.10 3.30 3.50 3.70 3.90
7 7.4 6.37 5.22 6.51 7.21 8.84
0.4 0.4 0.4 0.4 0.4 0.4 0.4
2.3 2.5 2.09 1.69 2.14 2.38 2.95
4.3 4.6 3.88 3.14 3.97 4.42 5.48
$1.23 $1.30
$0.24 $0.24

2025 2026
10.91 12.74
4.68 5.74
3.70 3.90
3.27 3.57
0.4 0.4
4.71 5.68