Workshop

1
Workshop

• Teams, groups, buyer/seller and companies
• Work plan - presentations from groups
• Exercises

2
Teams, groups and companies

• Team E-mail from Groups, Persons, Comments
• Buyer/Seller
• Marriott Ryan Pirnat 3 groups, 3 (4?) S, 4 B, 4
  B Company?
• BO Silvia Pagh Sølvsteen 3 groups, 3, 3,
  2 Buyer / seller
• BO Rasmus Opstrup 2 groups, 3, 4 Buyer/Seller
• Micon Agnieszka Konkel 3 groups, 4 B, 4 B, 3 S -
• Vestas Jurgen Jansen 1 group, 4 B Other groups
• Vestas Jakob Bendixen 1 group, 3 B Other
  groups
• Color Print ? Jakob Loenbro Jensen 1 group,
  4 Other groups,
• Buyer/seller
• ? Kristian Marthedal 3 groups, 4, 3, 4 Company,
• Buyer/seller
• ? Geir Midtmoen 1 group, 2 Company, other
• groups, Buyer /
• seller

3
Work plan (I)

• Tasks, dates responsibilities
• Information gathering learning
• Annual reports, other relevant materials from the
  company (homepage)
• Roadshow - information from company
• Contacting / Meeting the company (investor
  relations / CFO)
• Important competitors (annual reports)
• Trade / Industry association
• Stock exchange
• Share analysts
• Market information (library)
• Search on www
• Read and understand the information you have
  gathered

4
Work plan (II)

• Chapter 4, 5, 6 7 on 30 September
• Chapter 8-13 on 7 October
• Business Strategy analysis (chapter 11)
• Accounts analysis (chapter 9)
• Financial analysis (chapter 10)
• Prospective analysis (chapter 11, 12 13)
• Building model - accounts, prospects (CD)
• Mid stage report - Oct 21, evening
• Draft report price - Nov 13, evening
• Negotiation - Nov 16th
• Final report - Nov 25

5
Exercise 2.7 (1)

• Current valuation EG performance from
  shareholder view
• Woodco acquisitions accompanied by stock price
  downturns.
• Consumerco growing at rate of inflation only
• Consumerco cash flow subsidized Woodco and Foodco
  projects
• Foodcos high capital requirements reduced
  earnings growth
• Analysts consistently revised EG forecasts
  downward

6
Exercise 2.7 (2)

• As is value Discounted cash flow analysis
• Historical value is below EG market value
• Foodco value is less than the invested capital
  (focus is on growth)
• Consumerco cash flow comprises most of EGs value
  (focus is on cash flow)
• Woodco consolidation adds significant component
  of value
• Headquarters' costs are a large drag on value

7
Exercise 2.7 (3)

• Internal improvements key value drivers.
  Benchmarking with comparable firms and business
  system analysis
• Consumerco holding prices down, no investments
  in RD, sensitive to sales, sales force lack
  productivity, relatively high costs of goods
  sold.
• Woodco needs to focus on higher margins and less
  on growth, stick to the basic, mass-market
  segment of the business
• Foodco has no advantages in its extremely
  competitive markets, cut back to only profitable
  locations, franchise to decrease cost of capital.
• Eliminate 50 of overhead.

8
Exercise 2.7 (4)

• External improvements Sale to strategic buyer,
  flotation, MBO, liquidation
• Breakup based on comparable PEs and
  market-to-book would not outperform current
  market value.
• Consumerco is natural acquisition target with
  high cash flows.
• Foodco real estate holdings make it a partial
  liquidation candidate.
• Sell consumer finance portfolio since operating
  costs exceeds net interest income.
• Because of consolidation, Woodco would not
  attract a buyer for the risk of reconstructing
  Woodcos many components.
• EG is a takeover target with Consumercos cash
  flow

9
Exercise 2.7 (5)

• New growth opportunities Long-term growth
  alternatives.
• Acquisition and other growth initiatives is on
  the agenda.
• New business in Consumerco, exploiting brand
  name.
• Build on the restructuring initiatives already
  identified.
• Potential value of financial engineering debt
  management alternatives.
• Use stable cash flows to support more debt.
• Raise debt to repurchase shares or pay special
  dividends.

10
Exercise 2.9 2.10

• focus performance on value creation
• develop value-based performance targets
• restructure incentives
• evaluate strategic decisions in terms of impact
  on value.
• communicate value to investors
• reshape the role of CFO
• B

11
Next

• Next workshop and lecture will be in 14 days (30
  September)
• Workshop (8.55-9.40)
• Dialog and coaching
• Exercises 4.3, 4.11, 7.10
• Lecture Strategy Metrics
• CKM 4, 5, 6, 7 Articles (2Ghemawat)