Mergers and Acqusitions

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MGMT E 2720 Mergers and Acquisitions

Supplemental Case Questions

1. The New York Times

a. Why is there so much family control in the newspaper business?

b. How did the Sulzberger family manage to retain control on the NYT after it went public?

c. How does the NYT dual class structure differ from the one used by Dow Jones, prior to its takeover by Rupert Murdoch?

d. What explains the behavior of the NYT institutional shareholders – not just Morgan Stanley but also Private Capital Management, T Rowe Price and Vanguard?

e. How should Arthur Sulzberger, Jr. respond to Morgan Stanley’s proposal?

2. Valuing AOL Merger

a. The Merger was completed on January 11, 2001. Was it a good idea? Did AOL stockholders receive value? Did Time Warner shareholders receive value?

b. Do you believe the new company will succeed? If so, how will value be created short and long term?

c. What could go wrong with this “mega merger”? What are the most significant threats on the horizon for AOL Time Warner?

d. Do you believe the company will achieve its aggressive goals for 2001?

e. Any advice for AOL Time Warner execs in summer of 2001?

3. Upjohn Case

a. Evaluate the strategic reasoning behind the merger. Will the merger effectively address the strategic alliances faced by Upjohn?

b. How do you interpret the stock market reaction to the announced deal? What is the magnitude of performance improvement the market is expecting? Are these realistic?

c. Can you create an alternative restructuring strategy that might address the strategic challenges of Upjohn better? What are the risks and rewards from you strategy?

d. As a shareholder of Upjohn, would you support this merger?

4. Middleby

a. What caused Middleby's struggles in the 1990s?

b. To what extent were these exogenous versus endogenous i.e. what if anything could management have done?

c. What did Middleby’s Z scores in the late 1990s indicate in terms of trends in the company’s financial performance?

d. Why was the company’s 1998 covenant violation so worrisome?

e. What was the most important part of Bassoul’s five point plan?

f. What else might he have done to improve the company’s fortunes?

g. Why did Bassoul insist on doubling the company’s size through acquisition even as the company completed the final phases of its turnaround effort?

5. Mercury Athletic

a. Is Mercury an appropriate target for AGI? Why or why not?

b. Review the projections by Liedtke. Are they appropriate? How would you recommend modifying them?

c. Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections.

d. Do you regard the value you obtained as conservative or aggressive? Why?

e. How would you analyze possible synergies or other sources of value not reflected in Liedtke’s base assumption?

6. Kohler

a. What is the total enterprise value of Kohler using DCF? What is the value using a multiples approach (Comp value of similar companies)? What is the value of a share held by a minority shareholder that is implied by your valuations?

b. What assumptions can you use to arrive at an approximate share price of $55,400 that was estimated by Kohler? How do these assumptions impact your valuation?

c. What assumptions can you use in arriving at the approximate share value of $273,000 by the dissenting shareholders? How do these assumptions impact your valuation?

d. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April11, 2007? Assume that (i) if the trial proceeds, it is excepted to last at least one month and to result in one of two possible outcomes in terms of the price per share established in court; the $273,000, being claimed by the plaintiffs, or the...
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