HBSP Coursepack- Liston Case

Please explain answers.

HBSP- coursepack Liston case

please explain answers.

put yourself in the shoes of Charlton of SAC with the task of determining the value of Liston Mechanics corp. and determining if SAC should make an offer to acquire Liston.

1. determine SACs the current value status quo and the maximum bid/ offer price (control value) for Liston using the DCF approach:

a. status quo valuation: this is the current value of liston assuming no changes are made to the company. Use Listons current meteics (operating margin of 20%, NOWC/sales ratio of 20%, and a tax rate of 40%) and all other growth, depreciation, and capex information found in the last paragraph of page one of the case.

b. Control value: determine the value Liston assuming SAC acquires the firm and successfully implements the changes specified in the case. this should involve a change in the tax rate, the ratio of NOWC to sales. Use the same growth rates as in the status quo valuation. Only change the operating margin if, after analyzing Liston SAC, and NEC you can determine that a margin above 20 % appears possible (provide evidence)

2. determine Listons likely minimum asking price using the method of comparabke transactions:

a. assuming that management of liston would be open to an acuqistion, it is likely that they are aware of purchase of a similar firm by rival NEC a year earlier. this is described in the second paragraph on oage 2 od the case. What is the likely asking price that Listons board of directors would put forth if they were to demand a peice of 5.2 times EBITDA. Similarly, what would be the price if they demanded 11.5 times earning. NOTE: Since liston is a pricate firm wothout commin stock, the P/E ratio will be the total value of equit/ net income.

3. is the acquisition of Liston viable for SAC assuming that they can entact the enhancements and that they will to pay the same multiples as did NEC last year?

Put yourself in the shoes of Jack Charlton of SAC with the task of determining the value of Liston Mechanics Corp. and determining if SAC should make an offer to acquire Liston. 1. Determine SAC's the current value (status quo) and the maximum Bid/Offer price (control value) for Liston using the DCF approach: a. Status Quo Valuation: This is the current value of Liston assuming no changes are made to the company. Use Liston's current metrics (operating margin of 20%, NOWC/Sales ratio of 20%, and a tax rate of 40% ), and all other growth, depreciation, and capex information found in the last paragraph of page one of the case. b. Control Value: Determine the value Liston assuming SAC acquires the firm and successfully implements the changes specified in the case This should involve a change in the tax rate, the ratio of NOWC to Sales. Use the same growth rates as in the status quo valuation. Ontle change the operating margin if, after analyzing Liston, SAC, and NEC you can determine that a margin above 20% appears possible (provide evidence). 2. Determine Liston's likely minimum Asking price using the method of Comparable Transactions: a. Assuming that the management of Liston would be open to an acquisition, it is likely that they are aware of the purchase of a similar firm by rival NEC a year earlier. This is described in the second paragraph on page 2 of the case. What is the likely asking price that Liston's board of directors would put forth if they were to demand a price of 5.2 times EBITDA. Similarly, what would be the price if they demanded 11.5 times earnings. NOTE: since Liston is a private firm without common stock, the P/E ratio will be the total value of equity/ net income. 3. Is the acquisition of Liston viable for SAC assuming that they can enact the enhancements and that they will have to pay the same multiples as did NEC last year