Monmouth Report
EXECUTIVE SUMMARY
This report will analyze the price Monmouth should pay to acquire RTC by using DCF, market multiple, and stock exchange approaches.
Rationales on why RTC is a good acquisition by Monmouth
RTC is a good acquisition by Monmouth as it falls under their three established criteria for all acquisitions, and also because the future potential profits, growth opportunities and synergies from this acquisition is likely to be greater than the cost of this merger.
Sources of synergy gains
With the past acquisitions of Dessex Rule Company, Keane Corp, and Kroll Electric Corp., Monmouth was able to gain a combined sales force, an established distribution system, a knowledgeable expertise in the hand tool business, and quality and leading product lines that are already in the market. With the acquisition of RTC, Monmouth would be able to increase profits by lowering the cost of operations using the combined sales, marketing, and distribution channels. Profits would be greater from these synergy gains as advertising and sales expenses are reduced from 22% to 19%, as well as the costs of goods sold which could be reduced from 69% to 65%.
The merger of the two companies would also get a synergy gain as they complement each other in sales earnings and distribution, where RTC has a strong edge in the industrial market and a strong European distribution system, while Monmouth has established strengths in the consumer market and a distribution system in the US and Canada. RTC would work well with Monmouth as they can pull and push products into each other’s markets, resulting in an increase of sales and market territories.
With the opportunity created by the lack of shareholder support for the NDP offer, Monmouth would be able to acquire RTC and gain these substantial synergy gains by offering a fair price for this merger to satisfy all shareholders. To ensure its offer is accepted, Monmouth must satisfy RTC (20% equity), RTC shareholders (49.7% equity),
This report will analyze the price Monmouth should pay to acquire RTC by using DCF, market multiple, and stock exchange approaches.
Rationales on why RTC is a good acquisition by Monmouth
RTC is a good acquisition by Monmouth as it falls under their three established criteria for all acquisitions, and also because the future potential profits, growth opportunities and synergies from this acquisition is likely to be greater than the cost of this merger.
Sources of synergy gains
With the past acquisitions of Dessex Rule Company, Keane Corp, and Kroll Electric Corp., Monmouth was able to gain a combined sales force, an established distribution system, a knowledgeable expertise in the hand tool business, and quality and leading product lines that are already in the market. With the acquisition of RTC, Monmouth would be able to increase profits by lowering the cost of operations using the combined sales, marketing, and distribution channels. Profits would be greater from these synergy gains as advertising and sales expenses are reduced from 22% to 19%, as well as the costs of goods sold which could be reduced from 69% to 65%.
The merger of the two companies would also get a synergy gain as they complement each other in sales earnings and distribution, where RTC has a strong edge in the industrial market and a strong European distribution system, while Monmouth has established strengths in the consumer market and a distribution system in the US and Canada. RTC would work well with Monmouth as they can pull and push products into each other’s markets, resulting in an increase of sales and market territories.
With the opportunity created by the lack of shareholder support for the NDP offer, Monmouth would be able to acquire RTC and gain these substantial synergy gains by offering a fair price for this merger to satisfy all shareholders. To ensure its offer is accepted, Monmouth must satisfy RTC (20% equity), RTC shareholders (49.7% equity),