Calculation of Synergy Benefits for a M&A Deal

The following are excerpts from due diligence report for estimated financial positions as on 31. 3. 2021. in respect of an M&A
Deal in which both the Acquirer and the Target are manufacturing complementary FMCG household products with the same
raw material.
Please calculate monetary value of each line item of synergy benefits using a DCF model. Also please calculate the per share
Value of Synergy Benefits. You may assume numbers for additional information that you may require.

Sl.
No.
Identified Areas of Synergy Benefits Synergy / Compatibility UOM Acquirer Co. Target Co.

A. Capital
a. Equity Capital & Reserves Rs. 300 Mln. will reduce Rs. Mln. 1,000 600.00
Deployed after settlement of the deal.

b. Weighted average of Ke % 17 19.00

c. Long Term borrowed capital Collaterals are FA Rs. Mln. 2,500 900.00

d. Weighted average of LT Kd No change in requirement 12.0% 10.50%

e. Weighted average cost of % 0.12 0.10

Working Capital

B. Revenue Synergy - Higher Sales Rs. Mln 600

EBIDTA post consolidation 36%

C. Operational and Cost Synergies

2. Cash & Cash Equivalent
a. Average availability for FY 2016 To be maintained after deal Rs. Mln. 500 350.00

b. Annualised value of other Income Rs. Mln. 35 30.00

c. Income Yield 7.0% 9%

3. Net exposure to USD exchange rate Cash flow is even in terms

of
a. Year's Net Cash Flow Inflow - outflow USD. (-ve) 200 (+ve) 150
Mln.
b. Treasury operations Average strike Rates Self Consultant
c. Average Rates for transaction Avg. for FY 2016 - Rs. /USD 62 61.25
Outward 1
Avg. for FY 2016 - Inward 61 61.05

4. Procurement of the major Raw Material.

a. Total requirement in FY2016 MT 2,500 1,200.00
b. Average landed cost Rs. / MT 710 650.00
c. Stock holding period Plants are in same town Days 60 100.00

d. Credit Terms Days 60 75.00

5. Markets
a. Regions West, North North, East

b. Method of Distribution External Channel of Self stores + Distributors

Acquirer
takes care of 40% Turnover Distributors
c. Average cost of S&D on Net % 7 9.40
Revenue + Distributors' Margin

d. Addl. Investments required Volume to be handled 60% Rs. Mln 200

to handle Target's Prod. In Self
Stores. (Finance - Loan 75%)

Addl. Interest Cost p. a. 10%

e. Turnover Rs. Mln 11,250 5,640.00

f. Average period of receivables Days 45 55.00

6. Other elements of COGS Rs. Mln 5,000 1,840.00

COGS as percentage of Turnover 0 0.33

7. Leadership Manpower
a. Major Function Post acquisition the two No. 9 7.00
plants will function as
divisions