Name: Yongbin Lin
Land mark case
Landmark Acquisition Review
Acquisition of Landmark Facility Solutions offers an excellent opportunity for Broadways Industries in both strategic and financial terms. Given that USA organizations used more than $120 billion on facility management, expanding in this area offers a valuable opportunity to increase both the size of the firm and its financial performance. Acquiring Landmark Facility Solutions would help Broadways Industries to operate in multiple market segments, offer bundled services, expand its capacity, enhance customer care services, increase brand recognition, offer services at premium price, and secure large contracts. The company would also gain expertise in building engineering and energy …show more content…
This is obtained from enterprise value of Broadway and Landmark after acquisition. To have this value, we have to find the enterprise value for both companies after acquisition. Because the companies’ growth is projected, we have free cash flows for Broadway and Landmark. Therefore, there only one missing variable is cost of capital. The cost of capital I used is 8.42% which is obtained from the information on industrial performance in exhibit 4.first I use average unlevered beta from comparable companies to be industry beta, put it into CAPM to get 11.47% as cost of equity, here is a key assumption which is target D/E ratio of Broadway after acquisition. The industry has 0.547 in D/E ratio, and Broadway 0.18. Under these two scenarios, I assume Broadway will go more aggressive there fore I would to pick 0.547 as target ratio after acquisition, and then assume Broadway Credit level Baa, and then we will have our WACC which is 8.52%. Positive present value indicates that the next eight years following the merger, the company will be able to meet and surpass its costs. Individually Broadways Industries would have a net present value of $119.02, while Landmark Facility Solutions would have a present value of $125.53. The benefit from the acquisition is $40.32 (EV (after acquisition – Ev(Before acquisition). In the worst case where assuming acquisition took place the Enterprise value of Landmark Facility Solutions is $95.04, while that of Broadways is $89.07 this is compared to $110 value that would be accrued by Broadways after acquisition in the worst case, getting $10.37 benefit from the acquisition. This show under pessimistic scenario, both companies will have great recession. Even though Broadway can make 10.37 mil benefits from acquisition, the total value of acquisition still
Land mark case
Landmark Acquisition Review
Acquisition of Landmark Facility Solutions offers an excellent opportunity for Broadways Industries in both strategic and financial terms. Given that USA organizations used more than $120 billion on facility management, expanding in this area offers a valuable opportunity to increase both the size of the firm and its financial performance. Acquiring Landmark Facility Solutions would help Broadways Industries to operate in multiple market segments, offer bundled services, expand its capacity, enhance customer care services, increase brand recognition, offer services at premium price, and secure large contracts. The company would also gain expertise in building engineering and energy …show more content…
This is obtained from enterprise value of Broadway and Landmark after acquisition. To have this value, we have to find the enterprise value for both companies after acquisition. Because the companies’ growth is projected, we have free cash flows for Broadway and Landmark. Therefore, there only one missing variable is cost of capital. The cost of capital I used is 8.42% which is obtained from the information on industrial performance in exhibit 4.first I use average unlevered beta from comparable companies to be industry beta, put it into CAPM to get 11.47% as cost of equity, here is a key assumption which is target D/E ratio of Broadway after acquisition. The industry has 0.547 in D/E ratio, and Broadway 0.18. Under these two scenarios, I assume Broadway will go more aggressive there fore I would to pick 0.547 as target ratio after acquisition, and then assume Broadway Credit level Baa, and then we will have our WACC which is 8.52%. Positive present value indicates that the next eight years following the merger, the company will be able to meet and surpass its costs. Individually Broadways Industries would have a net present value of $119.02, while Landmark Facility Solutions would have a present value of $125.53. The benefit from the acquisition is $40.32 (EV (after acquisition – Ev(Before acquisition). In the worst case where assuming acquisition took place the Enterprise value of Landmark Facility Solutions is $95.04, while that of Broadways is $89.07 this is compared to $110 value that would be accrued by Broadways after acquisition in the worst case, getting $10.37 benefit from the acquisition. This show under pessimistic scenario, both companies will have great recession. Even though Broadway can make 10.37 mil benefits from acquisition, the total value of acquisition still