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Due Diligence on takeover
Ziv Reichert, João Carvalho, Robin Mariage, Taras Motuz
Structure1) Introduction
2) Critical Analysis
3) Company Valuation
4) Bidding & Implementation
5) Learning Outcomes
6) Conclusion
Parties
Business Logic
Long Term Goals
European Heavy Truck Market
Takeover Benefits
Business Logic
Financial Logic Initial Increase in Shares
Mandatory Offer
Ordinary/PreferenceShares
Financial Logic Payment/Offer
Scania AB
Developments
Corporate Valuation
In Millions $Current/LTM
FY 2011 Est
FY 2012 Est
FY 2013 Est
FY 2014 Est
FY 2015 Est
EBITDA 1,194 2,360 2,407 2,455 2,504 2,555
Corporation Tax (358) (708) (722) (737) (751) (766)
Change in Working Capital (362) (670) (100) (200) (110) (130)
+terminal value
Free Cash Flow 474 982 1,585 1,519 1,643 1,658 5,008
Discount Factor 1 0.909 0.826 0.751 0.683 0.621 1.000
Present Value 474 893 1,310 1,141 1,122 1,030 5,008
Net present value: 10,978
Synergies: €200m p.a.
Growth rate:2% p.a.
Tax rate:30%
Corporate Valuation
In Millions $Current/LTM
FY 2011 Est
FY 2012 Est
FY 2013 Est
FY 2014 Est
FY 2015 Est
EBITDA 1,194 2,360 2,407 2,455 2,504 2,555
Corporation Tax (358) (708) (722) (737) (751) (766)
Change in Working Capital (362) (670) (100) (200) (110) (130)
+terminal value
Free Cash Flow 474 982 1,585 1,519 1,643 1,658 5,008
Discount Factor 1 0.909 0.826 0.751 0.683 0.621 1.000
Present Value 474 893 1,310 1,141 1,122 1,030 5,008
Net present value: 10,978
Corporate Valuation
In Millions $Current/LTM
FY 2011 Est
FY 2012 Est
FY 2013 Est
FY 2014 Est
FY 2015 Est
EBITDA 1,194 2,360 2,407 2,455 2,504 2,555
Corporation Tax (358) (708) (722) (737) (751) (766)
Change in Working Capital (362) (670) (100) (200) (110) (130)
+terminal value
Free Cash Flow 474 982 1,585 1,519 1,643 1,658 5,008
Discount Factor 1 0.909 0.826 0.751 0.683 0.621 1.000
Present Value 474 893 1,310 1,141 1,122 1,030 5,008
Net present value: 10,978
Company Valuation Discounted Cash Flow
PV = FCF / (1 + WACC)n
Terminal Value T = DCF * (1 + g) / (WACC – g)
Net Present Value
NPV = ΣPVn , n = 15
Corporate Valuation
In Millions $Current/LTM
FY 2011 Est
FY 2012 Est
FY 2013 Est
FY 2014 Est
FY 2015 Est
EBITDA 1,194 2,360 2,407 2,455 2,504 2,555
Corporation Tax (358) (708) (722) (737) (751) (766)
Change in Working Capital (362) (670) (100) (200) (110) (130)
+terminal value
Free Cash Flow 474 982 1,585 1,519 1,643 1,658 5,008
Discount Factor 1 0.909 0.826 0.751 0.683 0.621 1.000
Present Value 474 893 1,310 1,141 1,122 1,030 5,008
Net present value: 10,978
WACC = 10%
The bid strategyA long-term and elaborated strategy:
1999 Volvo fails to acquire Scania
2006 MAN tries to takeover Scania
2008 Volkswagen acquires Scania
In 2011 VW takes over MAN
Horizontal & concentric takeover
Advisers: Volkswagen MAN
Create synergies between Scania & MAN
€200 million of cost savings
The bid strategy
Position of power of volkswagen
MAN’s supervisory advised shareholders to refuse the bid offer
The bid strategy The aim … « build a stake »
9th of April 2011 increase in voting rights 29.9% 30.47%
Mandatory offer accepted 3 month later
A total of €3.416 billion for the bid
Before the takeover
After the takeover
29.9% of voting rights
55.9% of voting rights
Financing and Implementation
VW had €20 billion cash to spend
Dominant position of VW
Create discord within MAN shareholders
Acceptance from the European Commission Had to be analysed: > €5 billion turnover
Would not impede the market competition
A deliberate low offer of €95/share
Real market value at €96.69/share
Learning outcomes
The Europe's biggest truck manufacturer
Synergies: € 200 million per year
Clear strategy
Avoid unnecessary risks
Objectives:
Which company to takeover?
How to force the takeover?
Friendly Hostile
How to maintain the price down?
Volkswagen had merit:
A deliberate low offer of €95/share
Real market value at €96.69/share
By using the strategies above stated
Not overvaluating the target shares & buying them overtime
Making the European Commission for Competition approve the deal
Conclusion Larger heavy truck market share
Ownership increase in Scania AB
Synergy effects
Experience for later acquisitions – Porsche
Useful and advisable takeover
References http://www.ft.com/intl/cms/s/0/25725f06-e879-11e0-8f05-
00144feab49a.html#axzz2OGCvcfoT
http://www.reuters.com/article/2011/05/31/us-man-volkswagen-idUSTRE74U18N20110531
http://europa.eu/rapid/press-release_IP-11-1080_en.htm
http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2011/11/Volkswagen_moves_key_step_closer_to_integrated_commercial_vehicles_group.html
http://ec.europa.eu/competition/mergers/cases/decisions/m6267_20110926_20310_2169433_EN.p
http://www.reuters.com/article/2010/11/15/us-man-scania-idUSTRE6AE1ML20101115.
http://online.wsj.com/article/SB10001424052702304803104576425101308540770.html.
http://www.man.eu/en/index.html.
http://www.marketwatch.com/story/eu-approves-vw-acquisition-of-truck-maker-man-2011-09-26.
Bloomberg Terminal, 2013
Thank you for your attention!
