Corporate Finance Essays

4207 Words Jan 6th, 2011 17 Pages
Monmouth, Inc.
Questions
1. Is Robertson an attractive acquisition for Monmouth? (MON)
2. What is the maximum price that MON can afford to pay based on a discounted cash flow
(DCF) valuation? What would be the maximum price per share?
• Estimate the WACC
• Credibility of the forecasts developed by Vincent and Rudd?
• Estimation of the terminal value.
• What determines whether sales growth is value-creating versus destructive of value?
3. What is the maximum price based on market multiples of later four quarters? EBIAT?
Based on prospective EBIAT? (also on a per share basis).
4. What price will be necessary to gain the support of the Robertson family, Simmons, and the great majority of the stockholders?
What are the interests,
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Discouraged, the investors wanted to exit their ownership position, and Monmouth—eager to add Keane’s well-known and high-quality measuring and fastening tools to its line—was interested in the opportunity. It was clear that some of Keane’s lines would have to be dropped and inefficient plants would have to be closed, but the rules, ratchets, and wrenches would play an important part in Monmouth’s product strategy.
Monmouth further expanded into hand tools with the acquisition of the Kroll Electric
Corporation. Kroll was the world’s leading supplier of soldering tools to the industrial, electronic, and consumer markets. It provided Monmouth with a new, high-quality product line and production capacity in England, Germany, and Mexico.
Monmouth was less successful in its approach to a fourth company in the hand tool business—the
Robertson Tool Company. Robertson was on the original “shopping list” of acceptable acquisition candidates that Mr. Vincent and Mr. Rudd had developed, but several attempts to interest Robertson in exploring merger possibilities had failed. The Robertson family had controlled and managed the company since its founding in 1864, and Paul Robertson, chairman of the board, had no interest in joining forces with another organization.
Robertson Tool Company
Nevertheless, Robertson was too inviting a takeover target to be overlooked or ignored for long.
A relatively poor sales and profit performance in

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