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Monmouth’s Inc. Case Solution & Answer

Monmouth’s Inc. Case Solution

Executive Summary

According to the needs of Monmouth’s Growth and Expansion program to include Diversification, Robertson Tool Company was the last organization considered for acquisition which had the qualitative and the quantitative capabilities to increase the value of Monmouth. This company according to the previous records provided, had been previously approached by Monmouth and the proposal was rejected, due to the Robertson’s organizational problems and the shareholder equity situation; the organization has again resurfaced as a potential acquisition target. The main problem regarded this is the Robertson Company’s value and the amount which should be offered to the equity holders to gain the control of the organization by Monmouth.

The takeover of the Robertson will enhance Monmouth’s strategic goals as it wants to mitigate the constraint which has concerned the cyclical nature of the business with uneven revenue figures. This will provide the differentiation it seeks, as Robertson will acquire numerous product details with the main products of the company with 50% market share for Clamps and Vises, and 9% market share of the $ 200 Million market of scissors and other accessories. Further, the organization will have synergistic benefits as the reduction of Cost of Goods sold to 65%, administration and selling expense decrease, and higher return increasing the Key performance indicators of the organization as a whole.

As for the quantitative part of the discussion, the fields which are used to provide analysis is by using a Discounted Cash Flow approach, Market Multiples Approach, and other financial bid perspectives considerate for this situation.

For the Discounted Cash flow Approach, the weighted Average cost of capital (WACC) has been calculated on the provided data which provides a WACC of 5.01%, the calculation is provided in the Exhibit 1 below. The discounted Cash flow approach provides the organizational value at $ 10.21 Million without the Terminal Value, and $ 125.87 Million with terminal Value. This leads to the share price of $ 17.49 and $ 215.52 respectively; DCF approach of share value is attached within Exhibit 2 below.

The other method used to compute the share price for the organization is through the Earnings before Interest after Tax (EBIAT) Multiple, this is taken by the industry average and provides a Net Share price of the organization at $ 20.49 / share, provided in Exhibit 3 of this staff analysis report. The EBIAT Multiple is a market derived multiple which categorizes the organization according to the top industrial areas of the market.

Statement of the problem

According to the needs of Monmouth’s Growth and Expansion program to include Diversification, Robertson Tool Company was the last organization considered for acquisition which had the qualitative and the quantitative capabilities to increase the value of Monmouth. This company according to the previous records provided, had been previously approached by Monmouth and the proposal was rejected, due to the Robertson’s organizational problems and the shareholder equity situation; the organization has again resurfaced as a potential acquisition target. The main problem regarded this is the Robertson Company’s value and the amount which should be offered to the equity holders to gain the control of the organization by Monmouth.

The other problem which can be derived from the data files is the subsequent integration benefits that will be achieved by Takeover of Robertson by Monmouth Organization. The main question is the subsequent risks and rewards of ownership of the Robertson stock, and the most appropriate form to facilitate the acquisition of Robertson Tool Company.

Analysis

For the purpose of this section as analysts, the analysis is categorized under the qualitative factors and the quantitative factors on the acquisition of Robertson Company……………………..

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