This Case is aboutÂ ENTREPRENEURIAL FINANCE, FINANCIAL ANALYSIS, MERGERS & ACQUISITIONS
PUBLICATION DATE: February 07, 2014 PRODUCT #: UV6790-HCB-ENG
In January 2012, Ellen Kullman, CEO and chairman of DuPont, must determine whether to keep or sell the organization ‘s Performance Coatings (DPC) segment. This esentially is an opening case on valuing a leveraged buyout. The case targets a publicly listed corporation’s decision to divest a big segment and asks pupils to compare the worth of the department if it stays under the control of DuPont or is sold to an outdoor party. The transaction size of nearly $4 billion is large enough for the potential strategic buyers in industry, bringing private equity (PE) organizations the prospective bidders.
The case scenario narrates a base-case adjusted present value (APV) model of DPC as a standalone business and supplies pupils relevant appointments to correct it to represent the department’s potential worth under PE possession (e.g., EBITDA increase, multiple arbitrage, and increased leverage). The case scenario is designed to substantiate and discuss the distinction amongst a publicly traded company’s valuation predicated on unlevered free cash flows along with a PE sponsor’s valuationÂ relying upon residual (levered) cash flows. This case has been educated in a second year elective class and in an advanced undergraduate class on corporate finance. It is not inappropriate to be used in courses on advanced corporate finance, private equity, or deal valuation.