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CHETAN DUDDAGI
CHETAN DUDDAGI
2015PGP091
2015PGP091
Financial Aspects of Merers an! Ac"#isitions
A $rief %eport on &i'#lation( M)A in *ine Co#ntr+
1, &tate t-e na'e of t-e co'pan+ assine! to +o# Star Shine
2, &tate t-e reser.ation prices s#/'itte! /+ +o#, Eplain t-e /asis for c-oosin t-ese reser.ation prices,
&tars-ine $el.ino Reservation Price $ 51 $ 38 &tars-ine reser.ation price calc#lations(
Con!entia" instr#ctions or Starshine%
• Ne& tra!e'(ro)otion ("ans or the Private Se"ection "ine &i"" *oost
!o)estic reven#e *+ $3, to $35 )i""ion (er +ear
• An internationa" &ine an! s(irits !istri*#tor that is e-(ecte! to
increase internationa" sa"es *+ $., to $.5 )i""ion (er +ear
• Savin/s in the )ar0etin/ #nction o $5 to $8 )i""ion
• Re!#ction in SG2A costs *+ a((ro-i)ate"+ $5,,,,, (er +ear
4ase! on the a*ove inor)ation o""o&in/ )o!ications &ere !one in the ass#)(tions%
• Increase in o)estic Reven#es 6$M7 $ 38 6 S+ner/ies ater
)er/er &ere e-(ecte! to a!! another 3 )i""ion !o)estic reven#es7
• Increase in Internationa" Reven#es 6$M7 $ .3 6Mi! va"#e o the
e-(ecte! increase in Internationa" sa"es has *een consi!ere!7
• Re!#ction in Mar0etin/ Costs 6$M9+ear7 $ : 6Mi! va"#e o the
e-(ecte! re!#ction in )ar0etin/ costs have *een consi!ere!7
• Re!#ction in Other SG2A 6$M9+ear7 $ ,5 6Given va"#e7
StarShine ca(ita" str#ct#re e*t9E;#it+ .359<1<1 ,5=:
9> .359 6.35?<1<17 ,3=. 3=.@ Tar/et 9> .:@ 6ea#"t va"#e in si)#"ation7 Since tar/et 9> is !ierent ro) c#rrent 9> &e #se AP> a((roach or va"#ation
Mo!ications in Ter)ina" va"#e (ara)eters%
Metho! #se! B Per(et#it+ )etho! 6Ass#)in/ that the /ro&th rate re)ains sta*"e over the co)in/ +ears7
• Ter)ina" >a"#e Per(et#it+ Gro&th Rate 3@ 6Ass#)in/
in!#str+ /ro&th rate *ase! on ana"+sts ca"c#"ations7
• C#rrent "evere! e;#it+ *eta 13.
o >a"#e &as o*taine! ro) the avera/e o "evere! e;#it+
• Esti)ate! Un"evere! E;#it+ 4eta ,8
o >a"#e &as ca"c#"ate! *ase! on co)(an+ !e*t 6$
.35)n7 an! e;#it+ va"#es 6$ <1<1)n7 c#rrent "evere! e;#it+ *eta 613.7
$ase! on all t-e a/o.e 'o!ications AP3 approac- pro.i!e! a .al#e of 4 50,10, Hence on ro#n!in o t-e .al#e 4 51 6as c-osen as t-e reser.ation price,
$el.ino reser.ation price calc#lation( Con!entia" instr#ctions a*o#t 4e"vino%
• Re!#ction in 4e" >inoDs 1,'(erson sa"es orce *+ 35 (ositions
+ie"!in/ an i))e!iate savin/s o $<5 to $= )i""ion (er +ear
• Increase 4e" >inoDs !o)estic reven#e *+ $.5 to $5, )i""ion (er +ear
*+ se""in/ 4e" >ino &ines thro#/h StarshineDs )ore ro*#st US !istri*#tion net&or0 an! thro#/h a(("ication o its s#(erior )ar0etin/ ca(a*i"ities
• C#"t#ra" !ierence *et&een 4e"vino an! Starshine
• Starshines )ana/e)ent is re"#ctant to )er/e &ith 4e"vino since
the or)er &o#"! have to c#t !o&n its )ar0etin/ costs i it acce(ts a )er/er oer ro) the "atter
4ase! on the a*ove inor)ation o""o&in/ )o!ications &ere !one in the ass#)(tions%
• It &as c"ear that )er/er &ith 4e"vino &o#"! )ean that Starshine has
to chan/e its strate/+ co)("ete"+ an! re!#ce its )ar0etin/ costs Fence the reservation (rice &as inten!e! to *e ;#ote! "ess in or!er to co)(ensate or the c#"t#ra" !ierence
• A"so since )ana/e)ent &as a"so re"#ctant to )er/e &ith 4e"vino
an! the stoc0 (rice o 4e"vino &as on the !o&na"" it &as ass#)e! that the )er/er &ith 4e"vino &o#"! *e consi!ere! on"+ i the !ea" occ#rre! at a (rice ver+ c"ose to the c#rrent stoc0 (rice o 4e"vino 6$ 3=7
• Increase in o)estic Reven#es 6$M7 $ .5 6 Lo&er *o#n! o the
e-(ecte! ran/e has *een consi!ere! as it &i"" re!#ce 4e"vinos reservation (rice7
• Re!#ction in Other SG2A 6$M9+ear7 $ <5 6Lo&er *o#n! o the
e-(ecte! ran/e has *een consi!ere! as it &i"" re!#ce 4e"vinos reservation (rice7
4e"vino ca(ita" str#ct#re e*t9E;#it+ 3,1938. ,:8:
9> 3,19 63,1?38.7 ,<< <<@
Tar/et 9> 35@ 6ea#"t va"#e in si)#"ation7 Since tar/et 9> is !ierent ro) c#rrent 9> &e #se AP> a((roach or va"#ation
Metho! #se! B Per(et#it+ )etho! 6Ass#)in/ that the /ro&th rate re)ains sta*"e over the co)in/ +ears7
• Ter)ina" >a"#e Per(et#it+ Gro&th Rate 3@ 6Ass#)in/
in!#str+ /ro&th rate *ase! on ana"+sts ca"c#"ations7
• C#rrent "evere! e;#it+ *eta 13.
• >a"#e &as o*taine! ro) the avera/e o "evere! e;#it+ *eta
o co)(ara*"e co)(anies
• Esti)ate! Un"evere! E;#it+ 4eta ,5
o >a"#e &as ca"c#"ate! *ase! on co)(an+ !e*t 6$
3,1)n7 an! e;#it+ va"#es 6$ 38.)n7 c#rrent "evere! e;#it+ *eta 613.7
$ase! on all t-e a/o.e 'o!ications AP3 approac- pro.i!e! a .al#e of 4 78,8, Hence on ro#n!in o t-e .al#e 4 78 6as c-osen as t-e reser.ation price,
7, &tate an! :#stif+ t-e c-oice of co'para/le co'panies ;Hint, %efer t-e forero#n! rea!in<,
$el.ino an! &tars-ine(
Co)(ara*"e co)(anies or 4e"vino an! Starshine% $el.ino &tars-ine an! $ellini
%easons for selectin $el.ino &tars-ine an! $ellini(
• A"" are )i!'sie co)(anies &ith co)(ara*"e reven#es
o 4e"vino ' $ 3:,)n Starshine ' $ 5.5)n 4e""ini ' $ 5,,)n • A"" these co)(anies into e-c"#sive &iner+ *#siness
%easons for N=T &E>ECTING ot-er co'panies(
• Internationa" 4evera/e Cor(oration 6I47
o Mis)atch in (ro!#ct (orto"io Co)(anies se"ecte! are
e-c"#sive"+ into &iner+ *#siness Hhereas I4 has *roa! (orto"io across &ine i)(orte! *eer an! sot !rin0s
o Inco)(ara*"e reven#es I4 ann#a" net sa"es are #st over $3
*i""ion
• Po&er 4evera/e
o Mis)atch in (ro!#ct (orto"io Co)(anies se"ecte! are
e-c"#sive"+ into &iner+ *#siness Hhereas Po&er 4evera/e is an internationa" *re&er *ott"er an! )ar0eter o *eer an! sot !rin0s
o Inco)(ara*"e reven#es over $= *i""ion in ann#a" reven#es • 4"anc >in Hiner+
o The co)(an+s sa"es are on"+ $.5 )i""ion &hich is "ess than
191,th o the sa"es o the co)(anies se"ecte!
• Le #trec Enter(rises
o LE is a ;#ite !iversie! co)(an+ o Over $., *i""ion in ann#a" reven#es
o Pro!#cts are vast"+ !ierent co)(are! to 4e"vino an!
!e(art)ent store chain 3,@ ro) ashion c"othin/ an! e-(ensive "eather "#//a/e an! another 3,@ ro) cos)etics an! (er#)es
a, Ho6 'an+ oers ? co#nter@oers 6ere 'a!e /+ +o# Di! +o# 6it-!ra6 an+ /i! Pro.i!e all t-e !etails an! i.e +o#r eplanations?:#stications,
=ers 'a!e to $el.ino( Jirst oer% $ 3:
Secon! oer% $ 3:5
The t&o oers )a!e &ere thro#/h the chat !isc#ssions 4e"vino !i!nt a/ree &ith va"#e in *oth the cases c"ai)in/ that the oer &as )#ch *e"o& their e-(ectation The reason or oerin/ the t&o (rices &as that the ca"c#"ate! reservation (rice &as $ 38 an! the stoc0 (rice o 4e"vino at that instant &as $ 3= So I chose the oer va"#es &hich "ie! *et&een the stoc0 (rice an! the reservation (rice
4e"vino &as facin sl#is- perfor'ance conKict in the senior )ana/e)ent ran0s A"so the con!entia" inor)ation (rovi!e! inor)e! that Starshine )ana/e)ent &as re"#ctant or a )er/er o&in/ to the c#"t#re !ierence This "e! to t-e re!#ction in s+ner+ /enets an! hence res#"te! in the lo6er reser.ation price,
/, Ho6 'an+ oers ? co#nter@oers 6ere 'a!e for +o#r co'pan+ Pro.i!e t-e !etails an! :#stif+ +o#r response, Di! a co#nterpart+ 6it-!ra6 a /i! 'a!e for +o# *-at 6as t-e e.ent#al o#tco'e of t-e a'e
I4 &as the on"+ co)(an+ &hich )a!e oers or ac;#isition A/ain the !isc#ssion on the oer (rices &ere )a!e thro#/h the chat o(tion avai"a*"e in the si)#"ation /a)e I4 initiate! the !isc#ssion as0in/ )e to ;#ote )+ oer (rice
Jirst oer% $ =5
I4 res(onse% i! not a/ree Fe sai! he &as /ettin/ a *etter !ea" &ith 4e"vino Price oere! *+ I4 $ 55
M+ res(onse% Secon! oer $ =3
I4 res(onse% i! not a/ree a/ain Secon! oer ' $ 58 M+ res(onse% Thir! oer ' $ =.
I4 res(onse% i! not a/ree Trie! to ne/otiate or $ 5 M+ res(onse% To"! $ =, &o#"! *e the na" oer (rice ea" )a!e
The reason &as ne/otiatin/ the (rice ro) $ =5 to $ =, is that the ca"c#"ate! reservation (rice or Starshine &as aro#n! $ 51 an! the event#a" !ea" (rice &as hi/her than this A"so s+neries in ter's of
!istri/#tion net6orBs 6I4 &as &e"" 0no&n in the in!#str+ as a (reerre! (artner or !istri*#tors *eca#se o its a*i"it+ to ;#ic0"+ an! ecient"+ restoc0 &ho"esa"ers &ith (ro!#ct7 an! access to !istri/#tion c-annels a/roa! i)("ie! that the !ea" &o#"! *enet Starshine
=#tco'e(
Stoc0 (rice &tars-ine% Increase! /+ ,58 to 4 0, Stoc0 (rice o $el.ino% ecrease! *+ .331@ to 47 Stoc0 (rice o I$% Increase! *+ 7,58 to 48
