Alfa Coller Case Study Solution
Valuation of Acquisition In Comparison With the Costs of Recent Acquisitions of Comparable Companies
Although, the acquisition seems to be valuable for the company with high value of synergies, but, the valuation should also be evaluated in comparison to the recent acquisitions of the comparable companies to get a broader idea of the acquisition decision. Various metrics provided in the case in the section of data regarding the comparable companies could be evaluated to determine the actual worth of the acquisition in comparison of recent events. It could be seen from the table in the case that the maximum enterprise value for the acquisitions is $236 and a minimum enterprise value is $2.3 as compared to the enterprise value of Coller i.e. $68. This implies that in terms of enterprise value the acquisition decision could be considered as an average decision with a median enterprise value. Another metric that could be used for evaluating the decision is the equity value. The maximum equity value of comparable acquisitions is $195 with a minimum of $2. On the other side, Coller has an equity value of $60.04 that is again an average value. From the above discussions, it could be seen that although, the acquisition could not be considered highly efficient, but it could provide substantial value for ALFA.
Conclusion
It is concluded that the Alfa is one of the leading company in its sector but due to the high competition and the lack of presence in some emerging market the company acquire Coller to fill its lacking. The acquisition seems to be beneficial for both the companies due to the average equity value of Coller which is 60.04. However, Coller also one of the leading company in its sector and by acquisition the company would increases its revenue along with the reduction in the production cost.
Appendices
Appendix-1: DCF Valuation
| DCF Valuation | ||||||||||
| Plan | Formulated | |||||||||
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| Revenues | 34.312 | 35.787 | 37.326 | 38.93 | 40.61 | 42.35 | 44.17 | 46.07 | 48.05 | 50.12 |
| Revenue Growth | 4% | |||||||||
| EBITDA | 4.988 | 5.236 | 5.489 | 5.73 | 5.97 | 6.23 | 6.50 | 6.78 | 7.07 | 7.37 |
| EBITDA as % of Revenues | 15% | 15% | 15% | |||||||
| EBIT | 3.896 | 4.026 | 4.289 | 4.47 | 4.67 | 4.87 | 5.08 | 5.29 | 5.52 | 5.76 |
| EBIT as percentage of sales | 11% | 11% | 11% | |||||||
| NOPAT | 2.22 | 2.29 | 2.44 | 2.55 | 2.66 | 2.77 | 2.89 | 3.02 | 3.15 | 3.28 |
| Tax Rate | 43% | 43% | 43% | |||||||
| Add: Depreciation and amortization | 1.092 | 1.21 | 1.2 | 1.25 | 1.31 | 1.36 | 1.42 | 1.48 | 1.54 | 1.61 |
| Less: Change in Net Working Capital w-1 | -0.42 | -0.22 | -0.32 | -0.33 | -0.34 | -0.36 | -0.37 | -0.38 | -0.40 | -0.41 |
| Operating Cash Flows | 2.89 | 3.28 | 3.33 | 3.47 | 3.62 | 3.78 | 3.94 | 4.11 | 4.29 | 4.48 |
| Less: Capex w-2 | -1.48 | 0.01 | -1.00 | -1.05 | -1.10 | -1.16 | -1.22 | -1.28 | -1.35 | -1.42 |
| Free Cash Flows | 1.41 | 3.29 | 2.33 | 2.42 | 2.52 | 2.62 | 2.72 | 2.83 | 2.94 | 3.06 |
| Terminal Value | 57.70 | |||||||||
| Terminal Growth Rate (Case Exhibits) | 0.5% | |||||||||
| Net Cash Flows | 1.41 | 3.29 | 2.33 | 2.42 | 2.52 | 2.62 | 2.72 | 2.83 | 2.94 | 60.77 |
| Discount Rate w-3 | 6% | |||||||||
| Discounted Cash Flows | 1.34 | 2.94 | 1.96 | 1.93 | 1.90 | 1.86 | 1.83 | 1.80 | 1.77 | 34.48 |
| Enterprise Value | 51.80 | |||||||||
| Debt | -8.42 | |||||||||
| Equity Value | 43.39 | |||||||||
Appendix-2: Multiple Valuation
| VALUATION THROUGH MULTIPLE | |
| EBITDA 2002 | 4.52 |
| EBITDA MULTIPLE (Mean) | 11.99 |
| ENTERPRISE VALUE | 54.19 |
Appendix-3: Synergy Valuation
| Synergy Valuation | |||||||||||
| Current | Synergies | ||||||||||
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenues | 37.557 | 34.312 | 35.787 | 37.326 | 38.93118 | 40.6054 | 42.35161 | 44.17292 | 46.07255 | 48.05387 | 50.1204 |
| Increase in Revenue | 0.5634 | 1.0294 | 1.0736 | 1.1198 | 1.1679 | 1.2182 | 1.2705 | 1.3252 | 1.3822 | 1.4416 | |
| Growth in Revenues | 1.50% | 3% | 3% | 3% | 3% | 3% | 3% | 3% | 3% | 3% | |
| Decrease in Material and Production Cost | 1.75 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 |
| % Decrease | 64% | ||||||||||
| Value generated from Synergies | 1.68 | 2.15 | 2.19 | 2.24 | 2.29 | 2.34 | 2.39 | 2.45 | 2.50 | 2.56 | |
| Synergy Valuation | $16.65 | ||||||||||
| Discount Rate | 6% | ||||||||||
| Total Acquisition Value: | |||||||||||
| Standalone Value | 51.80 | ||||||||||
| Add: Synergy Value | $16.65 | ||||||||||
| Total Acquisition Value | $68.45 | ||||||||||
| Debt | -8.42 | ||||||||||
| Equity Value | $60.04 | ||||||||||
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