H. J. Heinz M&A Case Solution & Answer

H. J. Heinz M&A Case SolutionInvestors

The investors might face dilution of control as the acquisition will bring up new investors. However this will be compensated with the increment in the size of the organization.


The creditors of the company will be affected in a positive way as the new company will be large and will have better liquidity and solvency abilities. They will be more willing to give funding to the company.

Core valuation techniques to support M&A valuation

The valuation for the merger and acquisition can be made by the FCF and NPV valuation. This will give the view about the company’s future cash generating ability. This will ensure whether the company has potential to justify the price that is paid as consideration. Another method is the use of comparable and multiples. This will result in making the valuation based on the practical results from the historical mergers and acquisitions made that have similar attributes as this acquisition.

Influence of investment bankers on M&A transactions

The investment bankers have major roles in the M&A Transactions. They provide the valuation of the potential company and the fair values that reflects the value of the acquiring company to help the acquirer company in the process. The investment bankers also provide investment options and help in issuing securities in public to raise the funds. Each of the buyer or seller can use the investment bankers to negotiate the deal at their respective terms.

The role of activist investors in corporate strategic decision-making

The activist investor is the one who buys the significant amount of share of the company to have a say in the board’s decision making. He gets the power, because of its voting rights, in the decision making of the company. He significantly influences the corporate strategic decision and might influence on the decisions that is designed for personal gain ignoring the other stakeholders.

Evaluation of “Go Shop” Period

 In this transaction Interbank or intermediary like investors could play an important role between the H.J. Heinz and acquirer. In addition to this Go Shop agreement could impart certain restrictions on both acquirer and target company in terms of first bidding matching rights.

Valuation Analysis

Valuation through DCF

It is expected that in order to identify the total worth of the company and in order to evaluate the proposed bid that either it is suitable or not, valuation of the company is performed. For this purpose DCF model and Multiples methods are followed. In order to value the company under DCF model certain assumptions have been made regarding EBIT, depreciation, working capital changes and capital expenditure.

It is expected that revenue will grow by 1.3% and EBITDA will be 17.6% of revenue and it will remain constant in projected years. By incorporating working capital changes and capital expenditure free cash flows are identified. In order to incorporate the future benefits terminal value is also identified by assuming 2% terminal growth. By incorporating all these values net present value of the company is identified and for this purpose 6.5% discount factor is used which generates $33912 net present value…………….

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