Palamon Capital Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Recommendation:

Elson was concerned regarding the equity value of the investment to buy the 51% stake of the TeamSystem. He concluded that the investment’s worth is €120.77 million which would be required to buy the 51% stake of TeamSystem by using the Discounted Cash Flow Model and its worth of in terms of Weighted Average Cost of Capital would be €37.057 million.

Problem Statement:

In this case the defined issues included are:

Valuing the TeamSystem S.P.A in respect with the following:

ü Equity value of the firm(Defined in the calculation)

ü Identification of risk

ü Evaluation of proposed terms for investment

ü Way out strategies

All issues indentified in this case are analyzed within the qualitative analysis and quantitative analysis.

Introduction:

Louis Elson, a managing partner of a UK based private equity fund Palamon Capital Partners, was looking forward to invest in an Italian Software Company, known as TeamSystem S.P.A. In Italy, software market was considered as a rapidly growing market and Palamon Capital had the opportunity to acquire the 51% stake of TeamSystem. The 51% stake would be paid in amount of EURO 25.9 million. Elson intended to develop the assessment on the TeamSystem’s strategy to recommend it his colleagues. In the assessment following components were included:

Equity value of firm
Identification of risk
Evaluation of proposed terms for investment
Way out strategies

Louis Elson and Palamon Capital Partners:

In 1990, Louis Elson started the line of business namely Private Equity. After joining the E.M. Warburg, Pincus & Co. he initiated his focus on European transactions. He built the $1.3 billion Equity Investment Portfolio for Warburg, Pincus & Co. In the end of 1998, Louis and his partner, Michael Hoffman built the company Palamon Capital Partners with two other partners. In August 1999, they raised £440 million in the middle of Russian Debt Defaults through their marketing experience. Palamon Capital Partner Equity fund served those investors who see lower risk in venture capital but higher risk in leverage buyout. The company generates targeted return of 35% from a single portfolio and 20% to 25% from the mixed portfolio for a period of six years.

International Private Equity Industry:

Private Equity firms are those that are not listed in public exchanges for quotations and use following strategies for investments: Venture Capital, Leverage Buyout and Growth Capital. Participants of private equity investment the Private Equity firms and Venture Capital firms. Both participants provide funds to acquired companies for expansion of new product development, to reform company’s operations and for the ownership. Main customers of Palamon’s were regarding pension funds, individual investments and donations. North America had the largest dollar value of funds, invested in the equity market of the year 1999.

Palamon Investment Process:

Investment procedures included in the Palamon’s portfolio were based on expansion changes within the market and these changes were driven out of de-regulation of public equity funds with considerable changes in the equity market. They got attracted towards investment opportunities by means of investment banking, industry capital and personnel contacts. The research was based on performances, portfolio’s historical data and competitive advantages.

From past experiences they had an upper-hand for making terms of investment according to their own choice. Over the counter market agreement, they expand their chances of successful results, which this allows them to achieve targets and generate optimal incentives for their investors. On execution of an agreement that they offered to their customers, the value added support and selection of the best alternative to exit from the transaction helped them in gaining realized yields on fund’s investments. These save execution were included; the sale of the investment through Initial Public Offerings under stock exchange.

Valuation:

To invest in the TeamSystem, Elson was sure to evaluate the possible potential for convincing his partners to this new portfolio. Issues that he faced during this evaluation were; the TeamSystem had no calculation for the projected profitability and the historical data wasn’t enough to calculate projected cash flows for the future growth. He assumed that the TeamSystem’s revenue will grow at the rate of 15% per year and Palamon’s portfolio experts would help them to improve operating margins slightly.

Interpretation of calculation:

Discounted Cash Flow explains the present value the of projected cash flow that would be generated in future and tells that how much worth returns of invested capital has it today, which................................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.