Essay Interco Business Case

Words: 1193
Pages: 5
Open Document
1. Assess Interco's financial performance. Why is the company a target of a hostile takeover attempt?

Interco's overall financial health is relatively healthy. It is highly-liquid as the current ratios are consistently over 3.5, showing that it has plenty of cash to cover any of its current liabilities. Its accounts receivable days indicate that in 1987 it took longer to collect on outstanding accounts while this figure would drop in 1988. The same trend follows with its inventory days, increasing in 1987 and decreasing in 1988, which would signal that its turnover was slower in 1987 and faster in 1988. The accounts payable days increased in 1987 while slightly decreasing in 1988. This is a healthy trend as Interco was able to take …show more content…
The sensitivity analysis provided in Appendix B shows that changes in the projected growth numbers can significantly affect the value of the company.

4. How would you advise the Interco board on the $70 per share offer?

Similar to Wasserstein Perella, we would also advise Interco not to sell. The offer of $70 per share is an insufficient amount and does not reach the price level that is advantageous for Interco to sell. First off, Interco has leverage when it comes to price negotiation with City Capital. The fact that the Rales Brothers formed City Capital with the sole purpose of acquiring Interco shows they will go to great lengths to acquire Interco. In addition, City Capital has already stated they are not only willing, but are also capable of increasing their bid price even higher than $70 per share. Interco is experienced with mergers and acquisitions, and they have the ability to demand a higher price not only because of this, but also because as of August 8, 1988, the day of the board meeting, Interco was trading at $72.50 per share.

5. How would you assess the actions of Interco's board up to August 8, 1988? Wasserstein Perella's? The Rale Brothers'? Drexel Burnham's?

Interco's board decided to reject offers at $64 and $70, respectively. The interest of the board was to increase shareholder value and its own. The board would only accept if the premium offers an upside that they, as a management
Show More

Related Documents: Essay Interco Business Case

Interco Case Study Essay

Grade 9,0 Corporate Finance II Interco Advanced Valuation Comments from teacher: In question 1, why do we use these equitation’s, explain and show then, i.e. ROE can go up with more leverage. More on comparables. In Q1 assumptions explained, that are then used in DCF. Max for question 1 and 2, two pages. Must power to put in Q3. Deduct tax in table 3. In DCF, show more how calculated and assumption missing about other income and corporate expenses. Table 6 to be fixed (already been done)…

Words 3813 - Pages 16

Acf Notes Essay

in the company. The stock award program offers employees the opportunity to earn shares of our stock over time, rather than options that give employees the right to purchase stock at a set price. 4. Valuation (Interco, Netscape, Google cases) Various methods to value business (look at comparable transactions, look at price multiples of a publicly traded competitor and apply that to you, discounted cash flow), WACC and free cash flows values the whole firm (values the firm’s assets), factors…

Words 2500 - Pages 10

Solid Manufacturing Final Edits Allowed Essay

Solid Manufacturing Corp. DPA701 case due July 1, 2015 Company Background Solid Manufacturing Corp. “(SM”) is a privately owned Canadian corporation that designs and manufactures equipment and conveyor systems for a variety of customers primarily in the natural resources industry. Headquartered in North Bay, Ontario, SM operates as a quasi-independent group of three subsidiary companies. The three subsidiary companies are Mining Products, Industrial Solutions, and Truck Products. SM was founded by…

Words 5184 - Pages 21

Management Professional Essay

the dawn of a dramatically reshaped telecom landscape. When North River Ventures began creating growth models for the telecommunications industry over a decade ago, they observed that the lack of Wal-Mart scale economics would implode first the IXC business and then force consolidation on the wireless carriers and the IECs. This process has unfolded exactly as NRV predicted and consolidation has accelerated throughout 2004-2005 as the strong devoured the weak and repositioned themselves for their next…

Words 4657 - Pages 19