Heather Evens Case Study
4. Evaluate Heather’s financing alternatives - Arden & Co. ·A private investment company with excellent reputation ·Intend to do the whole deal ·Heather’s friend worked for this company, so it was easy to approach ·There was still no formal discussion on this deal when the holiday line was beginning - Other venture capital firms ·An opportunity to collect money as under an emergency ·It would take a lot of time to talk with unfamiliar company from a fresh start ·It might a hard bargain than private investors - Helen Neil ·A small venture capital firm which had been approached ·The owner was a proven designer, so she is familiar with garment industry ·This company had relationships with manufactures and retailers, and these resources might be useful for Heather Evans’ new company ·This company lacked any real operating management ·The financing prerequisite was alliance as a joint venture, which meant Helen’s any deal was dependent on the approval of Helen - Private Investors ·20 private investors showed interested in investing in Heather’s company, so it was a big opportunity to collect money ·Negotiating with each of these investors needed an amount of time ·It was very hard to structure the deal to meet the divergent interests of 20 private investors ·The ownership structure might be too complicated, and Heather would feel difficult to control
5. Are Heather’s expectations reasonable regarding control, licensing, valuation and exit strategy? - Calculation Step 1 calculate comparable company P/E multiple by using the Liz Claiborne IPO valuation IPO price ＝ P/E multiple Trailing EPS
$ 19.00 ＝ 9.60 $1.98
Step 2 $ 250,000 (1.50)2 = ROI = 562,500
5. Are Heather’s expectations reasonable regarding control, licensing, valuation and exit strategy? - Calculation Step 1 calculate comparable company P/E multiple by using the Liz Claiborne IPO valuation IPO price ＝ P/E multiple Trailing EPS
$ 19.00 ＝ 9.60 $1.98
Step 2 $ 250,000 (1.50)2 = ROI = 562,500