Yieldex (A) Case Study Help

Situational Analysis

Doug Cosman, a founder and chief technology officer at Yieldex, putting efforts to acquire more and more fund raising to start and strengthen its company- Yieldex. He proposed a technical solution for an online advertising system. Cosman conducted meeting with many potential investors and in the main while he received a call from his friend Smilion, vice president of Turn Inc. (Turn), he wanted to acquire Yieldex for 2 million in cash and with a 2 million Turn’s stock. On the other side, his investors would be disappointed because of this offer. A detailed financial analysis has been performed in order to examine the outcomes for each possible scenario. (See appendix 1 and 2).

If Cosman accept the Turn’s acquisition offer, he will gain $2,428,398 out of total $4 million, after paying the profits to his investors. And if he rejects the offer and continuous as venture capital fund raising then he could lose his ownership up to 6% (42%- 36%) in future. Further, it could be seen that if he accepts Tom Shield’s offer, Cosman will have share 50/50 percent ownership with him. This is also a huge loss but will be helpful in running the Yieldex effectively. (See appendix 1).

Cosman has a good experience in the field of online advertising system but he is new in the field of running a business. For this, he will have to hire Tom Shield and share his ownership because he is expert in starting and running the software businesses and have a strong management experience. Additionally, if Cosman hire Shield as a Chief Executive Officer and continuous the fund raising then the number of shares will increase with the share price at $0.50,after completing the A series fund raising. Then, the fund series B will increasethe share price at $1.00. This represent that the Yieldex will grow and require more financing. Thus, the Turn’s offer should be considered because it yields high benefits and will be a healthy option for Cosman in term of financial returns.

Question: 1(a)

After 5 years, the business will grow under the expert supervision of Cosman and Shield and will able to increase the share price. Cosman should accept Turn’s offer because it is uncertain that the company will be sold at $20 million in future. Further, it could be seen that if he sells his business at this time he will gain more as compared to its investors because in future, the investors’ ownership will increase, and they will receive more. Additionally, he will only receive his fixed salary throughout the five years along with a substantial decrease in his ownership. So, it is recommended that he the Turn’s offer should be considered because it yields high benefits and will be a healthy option for Cosman in term of financial returns. Further, the fixed salary is not enough for living a healthy life…………………

 

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