Kinder Morgan, inc. – Management Buyout Case Study Solution
Multiples Comparable Valuation
A detailed quantitative analysis has been performed in order to examine the transaction effect on the company’s value and analyzing the future prospect of the transaction with the help of multiple comparable valuation. In the appendix 3, the detailed analysis has been presented. According to the analysis, the company’s future intrinsic value would be $214 million with revenues, whereas with chaptalization the intrinsic value is $220 million. Thus, it could be seen that the company will earn huge profits in future with the help of increasing share value. Thus, it is concluded that the offer is viable and feasible, because it is yielding higher returns with the share price of $107.50 per share. The enterprise value percent is 19% of the total $140,398 million which reveals that the firm is one of the market leader as 19 percent out of the total enterprise value can be called excellent(RG Serra, LPL Fávero, 2018).
LBO Valuation
On the other hand, a detailed quantitative analysis has been performed in order to examine the transaction effect on the company’s value and analyzing the future prospect of the transaction with the help of LBO valuation. In the appendix 1, the detailed analysis has been presented. According to the analysis, the company’s future intrinsic value would be $196.47 million with per share. Thus, it could be seen that the company will earn huge profits in future with the help of increasing share value. Thus, it is concluded that the offer is viable and feasible, because it is yielding higher returns with the share price of $107.50 per share. In addition to this, if we look at the capital structure in exhibit1 of the firm, we will get to know that 48.75% of the capital is financed by debt which means that it is not a heavy debt financed company.
Conclusion
Thus, after examining both the valuation methods, it is concluded that the company should choose the market comparable valuation method in order to examine the effect of the proposed transaction, because it is yielding higher intrinsic value as compared to LBO valuation method. Moreover, buyout would yield increased profits and the increase in debt financing would also yield benefits. It is recommended that company should accept the offer with the share price of $107.45. The company could exit from this option in future easily by offering an IPO to the general public, which will also yield increasing benefits for the comapnay as a whole.....................................
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