Proposed Acquisition of Southern Comfort
1.Executive Summary
The case study has been approached from different valuation methods to ascertain if there is value in the acquisition of Southern Comfort. These methods all yield the same result, i.e. Southern Comfort is expensive at the asking price of $94.6million. The valuation methods also examined the reasonableness of the acquisition using methods such as Free Cashflow Analysis, Book Value methods and Price Earnings ratios analysis
The qualitative aspects have also been analysed to find out if there is value from a qualitative perspective. Methods such as SWOT analysis have been utilized to check if there would be a ‘perfect fit’. A perfect fit is basically an analysis that the acquisition will bring synergy between the two corporations. Key success factors were also looked at, as these can point out the viability of the acquisition by highlighting what will be key to the success of the new venture.
Evaluation of Private Company
The evaluation criteria will de done using the following:
Evaluate reasonableness of the asking price of $94.6 million
Effects of the acquisition on BF share price
How BF have chosen to position itself among its competitors would affect the appraisal of SC
2.Background
1977 BF adopted long-range financial goals
1)Hurdle rates for investment - 14% after tax
2)Size of capital budget through 1980
3)Target capital structure
4)Dividend payout
Objective of these goals was to “increase the value of the stockholders’ investment”
Other objectives
Creation of business approaches that BF could have not taken on its own
Focus on developing a new vision, a new set of expectations, a solid operating style and a culture that draws upon and respects the BF traditions but that rises above family roots
The proposal should offer a comprehensive analysis of the strategic and financial rationale behind the proposed acquisition transaction within the overall mission of BF
Best fit strategically
3.Qualitative Analysis:
The case study has been approached from different valuation methods to ascertain if there is value in the acquisition of Southern Comfort. These methods all yield the same result, i.e. Southern Comfort is expensive at the asking price of $94.6million. The valuation methods also examined the reasonableness of the acquisition using methods such as Free Cashflow Analysis, Book Value methods and Price Earnings ratios analysis
The qualitative aspects have also been analysed to find out if there is value from a qualitative perspective. Methods such as SWOT analysis have been utilized to check if there would be a ‘perfect fit’. A perfect fit is basically an analysis that the acquisition will bring synergy between the two corporations. Key success factors were also looked at, as these can point out the viability of the acquisition by highlighting what will be key to the success of the new venture.
Evaluation of Private Company
The evaluation criteria will de done using the following:
Evaluate reasonableness of the asking price of $94.6 million
Effects of the acquisition on BF share price
How BF have chosen to position itself among its competitors would affect the appraisal of SC
2.Background
1977 BF adopted long-range financial goals
1)Hurdle rates for investment - 14% after tax
2)Size of capital budget through 1980
3)Target capital structure
4)Dividend payout
Objective of these goals was to “increase the value of the stockholders’ investment”
Other objectives
Creation of business approaches that BF could have not taken on its own
Focus on developing a new vision, a new set of expectations, a solid operating style and a culture that draws upon and respects the BF traditions but that rises above family roots
The proposal should offer a comprehensive analysis of the strategic and financial rationale behind the proposed acquisition transaction within the overall mission of BF
Best fit strategically
3.Qualitative Analysis: