ISS A/S: The Buyout Suggested Analysis Questions 1. Assess the performance of ISS up to March...

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ISS A/S: The Buyout Suggested Analysis Questions 1. Assess the performance of ISS up to March 2005 (share price, acquisition performance/strategy, etc.) Why do you think it is the subject of an unsolicited buyout offer? How might the private equity buyers hope to increase value? 2. What is the value of ISS if it does not pursue additional acquisitions? What if it does pursue additional acquisitions? Should the board and shareholders of ISS accept the offer? a) Use the APV approach (Note that, to save you time, I have provided beta estimates in the additional spreadsheet labelled ISS_Estimates of Beta.xlsx.). Assume, for the sake of simplicity, that goodwill amortization expense is equal to zero. Also, where necessary, assume expected MRP of 5%. 3. Evaluate the returns to the private equity buyers using the Flow to Equity valuation approach. Note that, for your convenience, I have provided you the debt schedule in the additional spreadsheet labelled ISS_Starting Suggested Debt Schedule.xlsx. This schedule sets out the maximum loan amounts available each year for each class of borrowing, and the rates that the buyers were able to negotiate for each class. The term loan must be paid down according to the schedule. The other loans are bullet loans (i.e. all principal is paid off at the end), apart from the "acquisition facilities" (which are a revolver). 4. Does the bid make sense? What sources of value can the buyers add in order to earn a return on their investment? 5. Estimate how much the bondholders will lose if the private equity buyers do not refinance their debt. Should the private equity buyers do so? Tips: 1. All your arguments MUST be backed by data/financial analysis. 2. Explain your calculations (step-by-step) in your PPT deck. 3. Clearly state any assumptions that you are making. ISS A/S: The Buyout Suggested Analysis Questions 1. Assess the performance of ISS up to March 2005 (share price, acquisition performance/strategy, etc.) Why do you think it is the subject of an unsolicited buyout offer? How might the private equity buyers hope to increase value? 2. What is the value of ISS if it does not pursue additional acquisitions? What if it does pursue additional acquisitions? Should the board and shareholders of ISS accept the offer? a) Use the APV approach (Note that, to save you time, I have provided beta estimates in the additional spreadsheet labelled ISS_Estimates of Beta.xlsx.). Assume, for the sake of simplicity, that goodwill amortization expense is equal to zero. Also, where necessary, assume expected MRP of 5%. 3. Evaluate the returns to the private equity buyers using the Flow to Equity valuation approach. Note that, for your convenience, I have provided you the debt schedule in the additional spreadsheet labelled ISS_Starting Suggested Debt Schedule.xlsx. This schedule sets out the maximum loan amounts available each year for each class of borrowing, and the rates that the buyers were able to negotiate for each class. The term loan must be paid down according to the schedule. The other loans are bullet loans (i.e. all principal is paid off at the end), apart from the "acquisition facilities" (which are a revolver). 4. Does the bid make sense? What sources of value can the buyers add in order to earn a return on their investment? 5. Estimate how much the bondholders will lose if the private equity buyers do not refinance their debt. Should the private equity buyers do so? Tips: 1. All your arguments MUST be backed by data/financial analysis. 2. Explain your calculations (step-by-step) in your PPT deck. 3. Clearly state any assumptions that you are making.

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ISS AS The Buyout Suggested Analysis Questions 1 Share price analysis ISSs share price has been steadily increasing over the past few years with a significant jump in 2004 This could indicate that the ... View the full answer