Monmouth’s Inc. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Monmouth’s Inc. Case Solution

Qualitative

The takeover of the Robertson will enhance Monmouth’s strategic goals as it wants to mitigate the constraint which has concerned the cyclical nature of the business with uneven revenue figures. This will provide the differentiation it seeks, as Robertson will acquire numerous product details with the main products of the company with 50% market share for Clamps and Vises, and 9% market share of the $ 200 Million market of scissors and other accessories. Further, the organization will have synergistic benefits as the reduction of Cost of Goods sold to 65%, administration and selling expense decrease, and higher return increasing the Key performance indicators of the organization as a whole.

One of the main factors and growth for Monmouth is the acquisition of the distribution channel of Robertson which is categorized as one of the best in the market with access to over 140,000 retailers as provided. This track can be used for Monmouth’s other equipment as well, increasing the overall profitability and Revenue for the organization. The discussion of employing Robertson’s current management will ensure the competency of the management that will continue in the organization, and will save the organization redundancy and new talent acquisition costs.

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

As for the quantitative part of the discussion, the fields which are used to provide analysis is by using a Discounted Cash Flow approach, Market Multiples Approach, and other financial bid perspectives considerate for this situation.

For the Discounted Cash flow Approach, the weighted Average cost of capital (WACC) has been calculated on the provided data which provides a WACC of 5.01%, the calculation is provided in the Exhibit 1 below. The discounted Cash flow approach provides the organizational value at $ 10.21 Million without the Terminal Value, and $ 125.87 Million with terminal 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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Monmouth’s Inc. Harvard Case Solution & Analysis