Monmouth’s Inc. The Case Solution
Analysis
The quantitative and qualitative analyses are done for the main obstacles of the case.
Qualitative
The takeover by the Robert will make the strategic objectives of Monmouth because it needs to overcome and mitigate aspects which have the nature of clinical with odd figures of revenue.That would give the dissimilarities, as Robertson will take various product information with the primary products of the firm with the market share of 50% for Clamps and Vises, and 9% market share of the $ 200 Million market of scissors and other accessories.After that, the company will have benefits of synergistic as the decline in Cost of Goods sold of 65%, administration and selling expense and greater return will be increased as the Key performance indicators of the organization as a whole.
The main concern and growth for Monmouth is the acquiring of the distribution channel of Robertson which is classified as the best among the existing companies with about the access of 140,000 retailers as provided. This pathway can be used for the other products of Monmouth also, which will enhance the profitability of the organization. The discussion part of the employees analyses that the management can continue its competencies in the company and rescue its required the cost of new acquisition.
As there are rewards, so there are risks attached with this decision. As mentioned in the primary research of the organization, the reason for the low growth of the organization (at 2%/annum) of being lower than the industry rate of 6-7% which is due to inadequate financial systems, adherence to regulatory requirements, and other slow processes in the management of the organization; if not over turned this can lead to losses for Monmouth as a whole.
The synergistic benefits that are also assumed by the corporation as a whole according to the industry standards can be termed as inconclusive and in most terms, this benefit turn to an adverse effect as more management individuals is needed for the management of a new organization.
The main risks of this acquisition does relate to the overspending on the acquisition by Monmouth, as Monmouth itself is under a low spell of share price and with less interests from the market, it will be harder for the organization to cater resources for acquisition such as Institutional loans and equity issue to finance this, A bigger number does suggest more risks for the organization.
Quantitative
The quantitative area analysis the fields which are used to give analysis is by using a Discounted Cash Flow approach, Market Multiples Approach, and other financial bid perspectives considerate for this situation.
The Discounted Cash flow method, clarify the WACC has been figured out by the existing data which calculates the 5.01% of WACC. (See Exhibit 1).
The discounted Cash flow method provides the organizational value at $ 10.21 Million without the Final Value, and $ 125.87 Million with Final Value. This leads to the share price of $ 17.49 and $ 215.52 respectively; DCF approach of share value is attached within Exhibit 2 below.
The other method used to compute the share price for the organization is through the Earnings before Interest after Tax (EBIAT) Multiple, this is taken by the industry average and provides a Net Share price of the organization at $ 20.49 / share, provided in Exhibit 3 of this staff analysis report. The EBIAT Multiple is a market derived multiple which categorizes the organization according to the top industrial areas of the market.
The Earnings per share after the combination of the firms will provide an increase to the overall Monmouth’s group, this is provided in the attached Exhibit 4 below. The calculation provides that the maximum available of shares for Monmouth to increase without the Dilution in its EPS figures is 1.62 Million shares. The current Monmouth’s share is categorized at $ 24 at the current date. This provides a total valuation of $ 38.88 million, if ranked among the shares of Robertson than the maximum price which will be offered to shareholders of Robertson will be $ 66.57. This amount is way more than the required amount by the shareholders of Simmons and Roberson in total...................
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