Palamon Capital Partners/Teamsystem S.P.A.

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Palamon Capital Partners/TeamSystem S.P.A.
1. Valuation of TeamSystem S.P.A. using Free-Cash-Flow-to-Equity Model (FCFE) (1) Calculate Free cash flow to equity per year:
FCFE = NI – (CAPX – DEPR) –NWC + Net Borrowing
(2) Discount Rate / Equity Rate:
Elson estimated discount rate to be 14%. (Source: Elson believed that a 14 percent discount rate would appropriately capture the risk of the cash flows.) (3) Present Value:

Note: the company is expected to grow by 6% forever since 2003. (Source: Exhibit 8) (4) Calculations: Table1 & 2
(5) Conclusion:
The 51% of equity value is ITL 68.401 billion, over the investment EUR 25.9 million (ITL 50.235 billion). So, this investment is recommended.

2. Valuation of TeamSystem S.P.A. using multiple-based valuation (P/B multiple) (1) Price-to-book Ratio:

(2) Industry Profile:
Middle Market Accounting Software Companies| Market Value of Equity| Book Value| P/B multiple| Great Plains Software Inc.| 767893| 133193| 5.77 |
Intuit Inc| 6476010| 1673405| 3.87 |
Epicor Software| 154977| 122196| 1.27 |
Sage Group PLC| 5997648| 11187| 536.13 |
Symix| 84421| 36749| 2.30 |
Median| | | 3.87 |

(3) TeamSystem S.P.A.
P/B multiple| 3.87 |
Book Value of TeamSystem S.P.A. in 1999 (ITL millions)| 30,124 | Equity Value (ITL millions)| 116,579 |
51% of Equity Value (ITL billions)| 59.455 |

(4) Conclusion:
The 51% of equity value is ITL 59.455 billion, over the investment EUR 25.9 million (ITL 50.235 billion). So, this investment is recommended.
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