CARRIER AND TYLER REFRIGERATION: AN ACQUISITION FOR GROWTH Case Solution
INTRODUCTION
This case focuses on the growth strategy through acquisitions which is adopted by most of the companies. In this case one of the divisions of multi business United Technologies Corporation (UTC), named as Carrier is looking forward to enter into a new industry. This industry is the refrigeration industry. To serve this purpose the management of the company is looking forward to purchase the Tyler Corporation. Tyler Corporation is one of the main leading players in the refrigeration industry. This company is a major player in the display-case market. This case has focused on many different segments of this market such as the cooling and heating markets. A detailed analysis of these industries has been performed in the case to show the attractiveness of these cases to Carrier. The case has provided with the detailed cash flow information so that the value of Tyler could be estimated and calculated. All the important variable information such as those used in the calculation of weighted average cost of capital are also given in the exhibits.
CURRENT ENTERPRISE VALUE
Based on the free cash flow method, the current enterprise value of the company is around, $ 235854 in thousands. This valuation is the current valuation of the company till the year 2002. Within these cash flows, the effects of the synergies that would be created after the acquisition have not been incorporated. All these cash flows have been discounted back to calculate the present value for each year. The terminal value has also been calculated based on a discount rate of around 10% and the terminal growth rate for infinity of 3%. The calculations are shown in the table below:
ENTERPRISE VALUE
years 1998 1999 2000 2001 2002
Free Cash Flow 12,494 14,641 16,729 18,874 21,358
D.F 0.90725 0.8231 0.74675 0.67749 0.61465
Terminal Value 304544
PV 11335.2 12051 12492.4 12787 187188
ENTERPRISE VALUE 235854 ................
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