Yell Group Lbo Case Essay

2101 Words 9 Pages
Memo for Valuing Cross-Border LBO of Yell Group
Group 5: Li Xiao, Xia Liu, Minghao Gu, Shine Li

Table of Contents

1. Purpose and Overview

2. Acquiring Yell Group Is a Good Choice for Apax and Hicks Muse
2.1 Directory Industry has enjoyed fast growth both in U.K. and U.S.
2.2 Yell Group is a good LBO candidate
2.3 Apax and Hicks Muse are experienced media investors

3. Valuation
3.1 Valuation Method
3.2 FCF of BT Yellow Pages
3.3 FCF of Yellow Book USA
3.4 Interest Tax Shield
3.5 Valuation Result

4. Other Issues
4.1 the Transaction Method of this Deal
4.2 Sensitivity Analysis


Exhibit 1: Re-Projection and pro-forma of BT Yellow Pages
Exhibit 2: Data for Comparable Listed Companies (five-year average
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2.3 Apax and Hicks Muse are experienced media investors Apax had a strong record in the telecoms and media sector, with investments including Jazztel, The Stationery Office, Future Publishing, and Ginger Media Group. In 1999, Apax Funds acquired TDL Infomedia, Yell’s main competitor in the United Kingdom, which it subsequently sold to SEAT Pagine Gialle in 2000 for a transaction value of EU 745 million. In 1998, Hicks Muse was the largest private equity media owner in the world, with more than $4 billion invested in media sector transactions. Among Hicks Muse’s key media investments were Clear Channel Communications, LIN Televesion, Davivo International, Mandeville Cable, International Outdoor Advertising, Marcus Cable, and Claxson Interactive Group. Hicks Muse had made a number of acquisitions in Europe including Media Capital, a Portuguese company with activities in television, radio, newspapers, and magazines. The firm had recently declared its return to “back-to-basics” strategy, which meant investing in media, branded consumer goods, and manufacturing industries.
3. Valuation
3.1 Valuation Method We think the capital cash flow(CCF) method is the proper valuation method for this LBO deal, because through the transaction the capital structure of Yell Group would change, and there is no constant D/E ratio for us to calculate. Capital cash flows are the after-tax cash flows that are available to all security holders

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