Buy Side Analysis Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Buy Side Analysis Case Solution

Introduction

IT group deals in two segments. One segment deals in providing IT related services, which infrastructure management, and support solutions whereas the other segment consists of SSIT units that are the manufacturing units of semiconductor components and related devices. The IT group, due to lack of a satisfactory performance from the SSIT unit, the company was considering on divesting this unit. In addition to this, IT group was also focusing on taking its company public. Due to weak economic condition in the country, the group is not earning the required return from investment. Therefore, it focused on selling the SSIT unit while keeping the management team in the group.

Large investors in the market are focusing on buying the group with the intention to increase their value for the company’s shareholders. The case calls for three different strategies, which requires detailed qualitative as well as quantitative analyses for them come up with any conclusion. However, in this case purchasing SSIT segment and combining it with Integrate Company is the recommended strategy that could be adopted to earn the required rate of return for X Capital and is beneficial for the IT Group.

Strategy 1

The IT Group was focusing previously on going public, in order to earn high return from investment in the company. This could allow the company to make its presence global to become a global leader through the help of its strong products. However, due to instability conditions in market, the company estimated that the returns could not be generated, which called for selling the company to a prospective buyer.

As the first strategy, the larger investor X Capital was looking to purchase the IT Group due to its strong performance historically, with the exception of its SSIT segment, which did not make the group attractive sufficiently. X Capital estimated the future projection of the IT Group and came to know that there is a strong positive outlook of returns for its shareholders.

Moreover, with this purchase the company could be able to increase its presence in major areas of the world. The deal could be closed by using the different debt services including the senior debt and the mezzanine debt. In order to perform the leverage buyout valuation of the company, forecasting is done up to the year in which the revenues decline marginally beyond the projected period. With the help of quotation of lender, the cost of debt can be calculated as seen in the exhibit below.

The purchase price for the deal is calculated using the shareholders expectation of about 10 times multiple of projected 2016 EBITDA. In addition to this, the transaction as well as advisory fees of High Quality is estimated to be around 1% of the purchase price.

Qualitative Analysis

Looking at this strategy, it is beneficial for X Capital but not for the IT Group. X Capital could significantly gain from this strategy because it can gain the most profitable segment, that is a leader in providing the IT solutions to a wide number of customers worldwide. Moreover, the historic performance of the company is also bright, which is primarily due to a strong management. However, taking this deal from the IT Group’s perspective it can be seen that due to the poor performance of the SSIT segment, the IT Group is in a mood to divest this segment, which cannot be achieved through this deal. Overall, by looking at the qualitative analysis, it can be concluded that this strategy does not provide an optimal solution for the given case.................

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