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Intuit Corporation

1. August 30, 1993, Intuit CEO, Scott Cook, faced a critical decision. Whatwas it?

2. What was his worry about the acquisition?

3. Intuits market value was in excess of $350 mil and ChipSofts was $225mill. What was the cost of the merger?

Approximately $260 mil After tax loss of over $150 mil for Intuit for the first 3 yrs. Penalty paid to Legal Knowledge Systems of $13 mil for not

acquiring them.

4. What are Intuits products?

5. What are ChipSofts products?

6. Who is MECA Software? And how do they fit the acquisition picture?

7. Who is Legal Knowledge Systems, Inc. LKS? How do they fit into thepicture?

8. What are the agreements between LKS and Intuit?

9. What was Intuits first offer to ChipSoft? And what new offer did Scott

Cook feel would complete the deal?

10. What 2 major problems persist?

11. What type of tax and accounting merger arrangement is expected fromthis deal?

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Liabilities will occur and a tax benefit of increased depreciation deductionswill result.h) market value of other obligations: describe additional costs such asgolden parachutes, cost of termination of another contract, etc. Determine

amount.

In order to determine the SYNERGY we must find the economic benefit(GAIN) of the merger, orVAB VA VB = GAIN. So you can estimate the FCF for:(1) VAB to find the GAIN oralternatively, if all the GAIN can be attributed to Firm B, then VAB=VB* so(2) VB* where the GAIN = VB* - VB.

Here is an example of the quantitative plan resulting from ChipSoftacquisition by Intuit. Please DO NOT use these numbers for your case

report. Forecasts all in millions.

Yr 01993

Yr 11994

Yr 21995

Yr 31996

Yr 41997

Yr 51998

Salesgrowth

38% 38% 40% 40% 40%

Sales $70 $96.6 $133.3 $186.6 $261.3 $365.8(1-.35)EBIT(10%sales)

$6.28 8.67 $12.13 $16.98 $23.78

NWC

5% sales

$53.4 4.83 6.67 9.33 13.07 18.29

+/-NWC -$48.57 +1.84 +2.66 +3.74 +5.22CF fromNWC

+$48.57 -1.48 -2.66 -3.74 -5.22

CapExpend

0 0 0 0 0

Free CF $54.85 $6.83 $9.46 $13.25 $18.55TerminalValue @g= 10%

$1020

Discount@12%

1.000 0.893 0.797 0.712 0.636 0.567

PV of CF $48.98 $5.44 $6.74 $8.43 $588.86

Assume earnings growth rate is 10% (DO NOT USE). Kw is 12% (USETHIS). It gives a Terminal Value of $1020m.

PV of Yrs 1-5 FCF plus PV of Terminal Value = $658m

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VB* = VFIRM* - VDEBT = $606m - $0 m = $658mGAIN = VB* - VB = $658m - $163m = $495mVAB = VA + VB + GAIN

= $357m + $163m + $495m = $1015m

COST = (.39xVAB) VB - $13m= (.39x$1015m) -$163m - $13m= $220m

NPV(merger) = GAIN COST = $495m - $220m = $275 m