A private equity fund calls you regarding its interest in Active Dreamz SA, a French video...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A private equity fund calls you regarding its interest in Active Dreamz SA, a French video games company. Active Dreamz SA conducts two businesses: (i) conception and (ii) publishing and editing (video games usually created by third-party studios). The publishing and editing business includes significant licence agreements which qualify as so-called intuitu personae or contain clauses prohibiting their transfer without consent from the contractor. Active Dreamz SA's share capital is allocated as follows: Shareholders Founder A Founder B Employees Number of shares (each of EUR 10 of par value) and voting rights 51,000 33,334 15,667 The fund is interested in acquiring Active Dreamz SA (but only the publishing and editing business and not the conception business). The purchase price amounts to 40 million € financed by way of equity and third-party debt. The fund wants to maximize the leverage (assume that third-party debt would bear interest at 7% p.a.). Active Dreamz SA has retained earnings of 7 million € and distributable reserves and provisions of 5 million €. Its available cash amounts to 4 million €. The publishing and editing business of Active Dreamz SA generates each year a net profit of approximately 1.5 million €. The fund asks you to: describe the preliminary corporate steps to be undertaken in order to enable it to acquire the publishing and editing business of Active Dreamz SA only ● ● explain how to determine the leverage that could be put in place (assuming no taxes) and its potential impact on the structure of the third-party acquisition financing (do not spend too much time) describe the potential acquisition and financing structure (i.e., financial flows with figures, if possible) at the time of the acquisition, once the acquisition has been completed and at the time of an exit describe two mandatory checks that you should conduct before letting the fund execute any acquisition document explain the adverse consequences, if any, if Founder B refuses to participate in the sale transaction and, if there are, whether and how these may be mitigated explain what type of security could be granted to the third-party providing acquisition financing, and whether Active Dreamz SA could lend all or part of its available cash in order to finance the acquisition (assuming this loan from Active Dreamz SA would bear an interest rate of 3,5% which is lower than that offered by the third-party financier (7% p.a.) describe two contractual protections that you would recommend including in the acquisition agreement A private equity fund calls you regarding its interest in Active Dreamz SA, a French video games company. Active Dreamz SA conducts two businesses: (i) conception and (ii) publishing and editing (video games usually created by third-party studios). The publishing and editing business includes significant licence agreements which qualify as so-called intuitu personae or contain clauses prohibiting their transfer without consent from the contractor. Active Dreamz SA's share capital is allocated as follows: Shareholders Founder A Founder B Employees Number of shares (each of EUR 10 of par value) and voting rights 51,000 33,334 15,667 The fund is interested in acquiring Active Dreamz SA (but only the publishing and editing business and not the conception business). The purchase price amounts to 40 million € financed by way of equity and third-party debt. The fund wants to maximize the leverage (assume that third-party debt would bear interest at 7% p.a.). Active Dreamz SA has retained earnings of 7 million € and distributable reserves and provisions of 5 million €. Its available cash amounts to 4 million €. The publishing and editing business of Active Dreamz SA generates each year a net profit of approximately 1.5 million €. The fund asks you to: describe the preliminary corporate steps to be undertaken in order to enable it to acquire the publishing and editing business of Active Dreamz SA only ● ● explain how to determine the leverage that could be put in place (assuming no taxes) and its potential impact on the structure of the third-party acquisition financing (do not spend too much time) describe the potential acquisition and financing structure (i.e., financial flows with figures, if possible) at the time of the acquisition, once the acquisition has been completed and at the time of an exit describe two mandatory checks that you should conduct before letting the fund execute any acquisition document explain the adverse consequences, if any, if Founder B refuses to participate in the sale transaction and, if there are, whether and how these may be mitigated explain what type of security could be granted to the third-party providing acquisition financing, and whether Active Dreamz SA could lend all or part of its available cash in order to finance the acquisition (assuming this loan from Active Dreamz SA would bear an interest rate of 3,5% which is lower than that offered by the third-party financier (7% p.a.) describe two contractual protections that you would recommend including in the acquisition agreement
Expert Answer:
Answer rating: 100% (QA)
Acquisition of Active Dreamz SAs Publishing Editing Business 1 Preliminary Corporate Steps Spinoff of the publishing editing business Separate the bus... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I
Posted Date:
Students also viewed these law questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
A torsion pendulum consists of a metal disk with a wire running through its center and soldered in place. The wire is mounted vertically on clamps and pulled taut. Figure a gives the magnitude ? of...
-
How do intangible assets differ from most other assets? Why are they assets at all? What expense applies to intangible assets ?
-
Dev is working on the testing of internal controls over price changes in the inventory system. Dev has completed the controls testing to determine whether all price changes were approved by the...
-
An independent auditor has completed substantive tests of balance sheet and income statement accounts, and now plans to begin procedures designed to determine whether there are any loss contingencies...
-
ABC, product costing at banks, cross-subsidization. National Savings Bank (NSB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 7%...
-
Make this ERD diagram On Microsoft Visio Software And Upload the answer here. ER Diagram APP/website
-
Consider the stirred-tank reactor shown in Fig. P5-5. The reaction occurring is A ? B and it proceeds at a rate r = kCo where r = (moles A reacting)/(volume)(time) k = reaction rate constant Co (t) =...
-
question 2 Ahmed, Babu and Chatu are partners sharing profit and losses in the ratio 3:1:1 after interest on capital at 10% and salaries to Babu and Chatu of sh 300,000 each. Their trial balance for...
-
You are attending a county fair with your friend from your physics class. While walking around the fairgrounds, you discover a new game of skill. A thin rod of mass M = 0.530 kg and length = 2.25 m...
-
You are carrying a stack of 3 books (1.0 kg, 2.0 kg, and 1.0 kg) between your arm and your body, as show below. Given that you can squeeze your arm inward with a force of 50 N. a. Verify that the...
-
CBI-3 In most metals there are one or two conduction (free) electrons per atom with a total of something like 1026 free electrons in a 10 gram piece of the metal. These electrons are free to move...
-
5. A pebble is hurled upward by a slingshot at 6 m/s from the roof of a building 75 m high. Assume a(t)=-10m/s. Calculate the time it took the pebble to reach its maximum height. Record your answer...
-
15a. An electron is launched at a a=79.0 angle and speed of 8.56E+6m/s from the positive plate of the parallel plate capacitor shown. If the electron lands d=6.14cm away, what is the electric field...
-
Kennedy Appliance Inc.s Machining Department incurred $71,300 of factory overhead cost in producing hoses and valves. The two products consumed a total of 3,100 direct machine hours. Of that amount,...
-
Find the reduced echelon form of each of the matrices given in Problems 120. c 1 26 + 4
-
Under IFRS, what are the two alternative presentation formats for the profit or loss section of the SCI?
-
When is a long- term contract an onerous contract?
-
Bright Designs Limited began operations in 20X5 and, at the end of its first year of operations, reported a balance of $ 1,203,000 in an account called intangibles. Upon further investigation, it is...
-
Distinguish between P-time and M-time.
-
During the year to 31 March 2024, a company which qualifies as medium-sized spends 180,000 on research and development. This is qualifying expenditure under the R&D tax relief scheme. Explain the...
-
A company's accounts for the 17 months to 30 June 2023 include: The debentures were acquired (not for trade purposes) on 1 May 2022. Interest is payable half-yearly on 30 April and 31 October. Show...
Study smarter with the SolutionInn App