A financial advisory firm is putting together the deal book and running the valuation analysis for various private clients. Assume that you are the "rock-star analyst" in the firm and asked to lead the valuation team to finalize the offer. A 15% control premium and a 30% illiquidity discount are justified for all the situations. Also, assume that there are 100 million shares in all the target companies. Discuss what adjustments should be applied in each scenario and calculate the maximum offer to acquire the target.

 

Deal A: Forced buyout of a public company's minority shares of 20%. The intrinsic value of common equity based on the multiples model is estimated to be $90 million.

(1) What would be the maximum offer based on fair value to the minority shareholders?

 

Deal B: A strategic buyer acquires a privately held company with a majority shareholder, who owns 55% of the shares of this company. The intrinsic value of common equity based on the APV model is estimated to be $90 million and the present value of synergies is estimated to be $10 million. 

2) What would be the maximum offer to the controlling shareholder

3) What would be the maximum offer based on fair market value to the minority shareholders? 

Answer rating: 100% (QA)

For Deal A 1 The maximum offer to acquire the minority shares would be calculated as follows Intrins... View the full answer