This action might not be possible to undo. Are you sure you want to continue?
Merger Acquisition Recommendation
Merger Acquisition Recommendation Introduction In 2010 NBTY Inc. completed a merger with an associate of The Carlyle Group, under the agreements terms the Carlyle associate obtained 100% of NBTY’s equity. The Carlyle Group is an international alternative asset manager of various assets from investors’ assets mainly in private equity, real estate and credit alternatives. The
” (Comtex News. Team A also creates a pro forma cash flow budget for the Carlyle Group for the last five years (UOPX. The paper includes a justification for the recommendation. 2010. selling a variety of vitamins and supplements. The Carlyle Group’s Assessment of NBTY Inc. In addition. the extended economic situation. NBTY was an international vertically integrated manufacturer. (Datamonitor. “The Carlyle Group has $90. the use of merchandizing strategies which would increasing consumer demand through the help of consumer education and social media. In the aggregate. The company planned to build up its business through increasing sales in natural food. In this paper. 2011).000 people and conducted business mainly the United Kingdom (UK) and the US. 2010). the technology industry and communication.6 billion of assets under management committed to 66 funds as of June 30. NBTY marketed several thousand products using many brands.000 people around the world. healthcare. NBTY planned to increase wholesale trade in international markets and in the United States and international markets.’s alternatives and make a recommendation of a financial decision. NBTY employed about 15. The company recorded revenues close to three billion during the 20 fiscal year which is an increase of about 10% over fiscal year 2009. . NBTY. Inc had production capabilities which included the creation and testing of a many of vitamins and mineral supplement products. Team A analyses the Carlyle Group and NBTY Inc. The Carlyle Group employs more than 880 people in 19 countries. healthy eating products. Carlyle portfolio companies have more than $84 billion in revenue and employ more than 398. However.Merger Acquisition Recommendation 2 company’s investments is mainly concentrated focusing on aerospace and defense. 18/3/2010).
quality and effectiveness. In case of government actions. The supplements markets’ deterioration continues to affect sales. had negatively affected the nutritional supplement industry and impeded planned growth. wrapping. NBTY would increase operational costs and there can be lost of income from products that may be put on recall or recommended to be removed from complete circulation. This went further to affect NBTY’s ability to access capital markets and credits were not coming at all. production. This aspect could augment NBTY’s operations and investment costs considerably which in turn would adversely impact NBTY’s financial performance. NBTY’s funds under their credit facilities started to impact on operations and sales. Consequently. In some instances. Merrill Lynch and Center-view provided the same information to all parties offered assistance to any company that would need further understanding of the requirements. Carlyle observed that NBTY would have some problems abiding by new government regulation. within America and other foreign governments. The Definitive Proxy Statement with regards to the intended Carlyle and NBTY merger revealed that Merrill Lynch and Center-view contacted all capable interested parties to state their interest in the NBTY’s lines of business. distribution and trading of products would be open to scrutiny because the regulators of Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) are always inspecting vitamin and supplements products. cataloging.Merger Acquisition Recommendation 3 bordering on recession. Based on NBTY’s assessment of the factors that could affect its business. many interested bidders asked for more information. Merrill Lynch and Center-view also provided . marketing. In addition. there was a bit of bad publicity in the nutritional supplement market which is dependent of positive consumer opinion in terms of safety.
Merrill Lynch and Center-view provided the following parameters for all interested parties that NBTY shareholders have the following expectations by looking at: Earnings Before Interest. how they conduct financial matters.Merger Acquisition Recommendation 4 convincing qualitative judgments about distinctions between the vitamins and supplements industry. “NBTY has roughly $450 million in existing .” (Comtex News. information was also given about “the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.75 .00 (Comtex News. and their operating styles and where they stand in trying to acquire NBTY.$58. for a month.00 . Taxes. the initial provisions allowed NBTY. In addition.75 $47. 2010) Based on this background. 2010). Carlyle Alternatives Carlyle's had to consider an attractive premium for NBTY because other privateequity groups expressed a keen interest in the company.50 Consideration $55. In addition. and Apollo Global Management. Depreciation and Amortization (EBITDA) Per Share merger Range CY2010E EBITDA CY2010E EBITDA $43.$53.00 $55. including the common front presented by Bain Capital and Blackstone Group. the Carlyle Group decided to make a move to out bid other parties for the merger acquisition of NBTY. to seek for a proposal that can beat the offer than the Carlyle Group.
Carlyle Group knew that a merger with NBTY can provide possible gains. (market price per share/earnings per share) . 2010).Earnings Ratios (P/E Ratio) . More than half of NBTY’s revenue comes from direct sales of its products through outlets such as Target and Wal-Mart. Carlyle examined the stock based compensation expenditure which can be handled in the form of cash expenses to determine unrestricted free cash flow during the forecasted period.Carlyle Group can implement this market value ratio. historical information and relative selling multiples. Main stores in the US are the Vitamin World and Holland and Barrett in Europe (Comtex News. Carlyle had to consider the following merger funding alternatives: 1. In addition.The following are two metrics on which Carlyle Group can use to acquire NBTY based on the results on their investigation: Price .Merger Acquisition Recommendation 5 debt on its balance sheet. including the opportunity to be part of an organization that has a big asset size and better poise in the market to achieve greater economies of scale. There are many retail stores under the NBTY banner in numerous countries. there can be costs to NBTY that is not accounted for in the present count of shares. Carlyle designed a comparative analysis to determine how far other competitors would go based on their financial capabilities and credit worthiness. and subtracted net debt. Carlyle estimated the array of acquisition variables which are factored in current NBTY forecasts. Carlyle computed the current market assessment of the unrestricted free cash flows of NBTY using discount rates ranging that reflect Merrill Lynch and Center-view's estimates of NBTY's weighted average cost of capital on vitamins and supplements market comparables. Comparative Ratios .
2. al. P739). The price-to-sales ratio is always used as a gauged of how other firms and manufacturers in vitamin and industry are doing. al. An examination of the price-earnings across the board for the stocks in the vitamin and supplements market would accord Carlyle Group an obvious direction for the aimed price-earnings ratio range (Emery et. Enterprise-Value-to-Sales Ratio (EV/Sales) . Forecasted free cash flows (net income + depreciation/amortization .change in working capital) are discounted to a present value using the NBTY’s weighted average costs of capital (WACC).capital expenditures . 2007. The Carlyle Group should begin the process of assessing the net advantage to merging (NAM). Discounted Cash Flow (DCF) – This market value activity. “When the net . liabilities and products..” should show an increase in value (Emery et. 2007.. p68). After looking at how to financially fund the merger in a cost effective manner.Carlyle Group can implement the market value ratio and offer that takes into consideration NBTY’s assets. can provide an analysis to verify whether a NBTY’s present worth based in its assessed future cash flows is true. The NAM provides the Carlyle Group’s shareholders to see the benefits of the merger because the entire market value of Carlyle Group after the merger’s “net of the cost of completing the transaction and (2) the total market value of the firms before the merger. which is a fundamental valuation tool used in mergers and acquisitions (M&A).Merger Acquisition Recommendation 6 to formulate a proposal based NBTY earnings.
dividends etc. then they shall support the merger (Emery et. eliminate competition and most of all.. The principal motive behind the merger is to “create synergy that makes the value of the combined companies greater than the sum of the two parts. with the use of capital rationing. increase in supply chain pricing power.” (Cicarini. 2007. both companies must use an Optimal Decision Making Process and work hard to supplement their existing dynamic financial decision making policies on liquidity. merger will see an overwhelming respond of success if they optimize their decision making process using Comparative Ratios. the Carlyle Group’s anticipated performance of the NBTY assets will be high. Furthermore. With such an agenda at the fore front.Merger Acquisition Recommendation 7 advantage to merging is positive. inventories. Decision Leading to Recommendation Financial decisions. By acquiring NBTY. the merger would increase the wealth” of Carlyle Group shareholders. merger. value-priced nutritional supplements in the United States and throughout the world. At this point in the decision making process. 2007 p26) the quest for diversification. . increase performance while reducing cost. Capital budgeting projects. the decision making process must be handled with utmost care. growth. capital structure. al. all financial evaluations have proven that the Carlyle Group and NBTY Inc. the Carlyle Group would incorporate a marketer and distributor of a broad line of highquality. should be handled with caution. Recommendation of a financial decision The Carlyle Group should incorporate the use of capital rationing financial policies in order to maximize more profit in the NBTY Inc. while making sure these policies interact continually. particularly the Carlyle Group and NBTY Inc merger. P739). working capital.
The transaction will be valued at $3. The Carlyle group would agree to “acquire all of the outstanding common shares of NBTY for $55. Solvency ratios show the connection between the liabilities and assets of NBTY.00 per share in cash. Based on the above decision.” (Comtex News. the Carlyle Group can implement this market value ratio. 2010. The Carlyle Group would discover the earning capacity of NBTY Inc. To calculate profitability: Any business has many profitability ratios and any form of comparative ratio analysis can help to measure the productivity of the business.Merger Acquisition Recommendation 8 Justification for our recommendation Comparative ratio analysis and explanation of a range of accounting ratio would provide a better understanding of the financial condition and performance of a business concern. the Carlyle group can implement the flowing: .Earnings Ratios (P/E Ratio) for the merger acquisition deal. 3. The following are the advantages of using comparative ratio analysis: 1. To compute solvency: The Carlyle group can also measure the solvency of NBTY. Comparative analysis performance: The Carlyle Groups use of comparative in years leading to the merger. representing a premium of approximately 57% over NBTY's average closing share price during the 30 trading days ended July 14. (market price per share/earnings per share) to formulate a proposal based NBTY earnings. It is justifiable for the Carlyle group to use Price . Based on the information provided by Merrill lynch and Center-view.8 billion. 2010). 2.
will be benefiting from the merger with Carlyle because Carlyle is a much larger company that can provide them with more resources. the Carlyle group will perchance the stock of NBTY Inc as well as put its own stock on short sale and gain more value in the future. Our report shows that the net income would increase. . out of the US. One change that NBTY is going to have to adjust to is that they are no longer going to be a publically traded company because Carlyle is a privately owned corporation. Inc. Depository receipts: The Carlyle Group can provide depository receipts in the countries. Due to the envisaged profitability of the merger acquisition. and the low interest rate of the merger funding would yield positive results. where NBTY operates. Carlyle Group and NBTY would create a positive credit spread. Consequently.’s securities. Conclusion Entering into this merger can help the Carlyle Group to expand not only their cash flow but their market as well. Convertible bond arbitrage: The Carlyle Group can create convertible bonds specified so much Carlyle Group shares. This merger is in the best interest of all parties involved. there is a positive stock price stipulated in the merger.Merger Acquisition Recommendation 9 Merger arbitrage: by implementing a risk arbitrage. the depository receipts will give the Carlyle Group profit coming from the spread between the real value and the perceived value of NBTY Inc. In this situation NBTY.
. J. NJ: Prentice Hall. & Stowe. Finnerty. D.Merger Acquisition Recommendation 10 References Comtex News (2010) 8-K: Central Pacific Financial Corp (provided by EDGAR Online 8-K Glimpse) Emery. J. Corporate Financial Management. . R. D. D. (2007). Upper Saddle River..
Scott.. 1994. David F. (2007) International Business Economics Aalborg University – Master’s Thesis Levy. and others.. and Marshall Sarnat. Capital Investment and Financial Decisions. 5th ed. Upper Saddle River. Inc. Haim. Jr. New York: Prentice Hall. New York: HarperCollins. 5th ed. Annual Report On Form 10-K For The Fiscal Year Ended September 30. 2020 . 2009 Pinches. Essentials of Financial Management.Merger Acquisition Recommendation 11 João D. George E. NBTY. NJ: Prentice Hall. 1996.. Basic Financial Management. Cicarini Jr. 1999 United States Securities Exchange Commission Form s_4 for NBTY Inc.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.