The auto parts business has three large publicly held firms: O’Reilly Automotive Inc. (Orly), Advance Auto Parts Inc. (AAP), and Auto Zone Inc. (AZO). In addition to these publicly held firms, Carquest is the largest privately held firm in the industry. Assume that in summer 2010, your investment banking firm is considering whether to approach the top management of O’Reilly with a proposal that they consider acquiring Carquest, which owns over 4,000 auto parts outlets in the United States. As a preliminary step in the evaluation of the possible acquisition, you have assembled a team of analysts to prepare a preliminary analysis of acquisition price multiples that might be warranted based on current market conditions. The analyst team went to work immediately and compiled the following set of financial information and potential valuation ratios:
a. How would you use this information to evaluate a potential offer to acquire Carquest’s equity? b. What do you think is driving the rather dramatic differences in the valuation ratios of the three firms?
Answer to relevant QuestionsAssume that Jason Kidwell (from Problem 8-6) is able to purchase Toys’ n’ Things Inc. for $ 2.2 million. Jason estimates that after initiating his changes in the company’s operations ( i. e., the salary savings plus ...Corporation has projected its cash flows ( i. e., firm FCFs) for the indefinite future under the following assumptions: ( 1) Last year the firm’s FCF was $ 1 million, and the firm expects this to grow at a rate of 20% for ...The Owner of Big Boy Flea Market (BBFM), Lewis Redding, passed away on December 30, 2014. His 100% ownership interest in BBFM became part of his estate, on which his heirs must pay estate taxes. The IRS has hired a valuation ...Southwest Ventures is considering an investment in an Austin, Texas– based startup firm called Creed and Company. Creed and Company is involved in organic gardening and has developed a complete line of organic products for ...The Pampa Oil Company op-erates oil and gas exploration throughout the panhandle of Texas. The firm was recently approached by a wildcatter named William “Wild Bill” Donavan with the prospect to develop what he thinks is ...
Post your question