Proposed Acquisition of Southern Comfort Essay

2243 Words Mar 8th, 2011 9 Pages
1.Executive Summary
The case study has been approached from different valuation methods to ascertain if there is value in the acquisition of Southern Comfort. These methods all yield the same result, i.e. Southern Comfort is expensive at the asking price of $94.6million. The valuation methods also examined the reasonableness of the acquisition using methods such as Free Cashflow Analysis, Book Value methods and Price Earnings ratios analysis

The qualitative aspects have also been analysed to find out if there is value from a qualitative perspective. Methods such as SWOT analysis have been utilized to check if there would be a ‘perfect fit’. A perfect fit is basically an analysis that the acquisition will bring synergy between the two
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There are thus some glimpses of similarities in culture, management philosophy, and thinking which is quite a challenge in meshing in most acquisition deals from an organizational perspective. The transformation of cultures, values and change management though might seem simple on paper may need to be handled diligently.

4.Quantitative Analysis: Adding of Market Value
When evaluating an acquisition of this type there are two questions that are pertinent. First, is, why should we buy SC? The second is what is the appropriate asking price in relation to the offer price of $94.6million. These two questions will then yield a management decision whether SC is a good buy?

In answering the questions above, one should be guided by the strategic focus of BF which is “to consider challenging capital (projects), supporting them into more profitable projects, products and acquisitions”. However, irrespective of how nice and wonderful the acquisitions might appear to be, it is importance to apply robust valuation methodologies to ascertain the intrinsic (actual) value of the acquisition. Intrinsic value unobservable, one can only estimate it. As mentioned above BF management needs to create and increase the BF shareholder value. The SC acquisition is thus an opportunity to create value, if the price and intrinsic value differ. To evaluate the

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