The Case
ABC Automotive Products has selected you to advise them on the sale of their company. As
analysts you have been assigned to construct the valuation analysis that will be used in the
coming days to evaluate several incoming offers. The analysis is critical for the client as they
will be using as the bases for which offer they will accept.
ABC is expecting to see strong supporting analysis of how you arrived at the valuation. You
must provide a strong supporting financial model to support the range of values that you arrive
at.
Using the attached information which includes a company snapshot, public comps, comparable
transactions, Income Statement, and a DCF analysis, you need to determine a range of values
for ABC Automotive Products.
Company Snapshot
ABC Automotive Products is a vertically integrated supplier controlling all aspects, and taking
responsibility for, the design and manufacture of on-glass connection systems, including the
soldering process on customer glass and the functionality in the vehicle or component assembly.
Copyright © 2006 Deloitte Development LLC. All rights reserved.
1
Valuation Analysis
Valuation Methodologies
Comparable Company
Analysis
Comparable
Transaction Analysis
Discounted Cash Flow
Analysis
Leveraged Buyout
Analysis
 Value based on comparisons
 Value based on comparisons
 Value based on the present
 Value based on potential
 Comparable publicly traded
 Comparable acquisitions
 Free cash flow is defined as
 Value constrained by credit
with “similar” publicly traded
companies
companies similar in
business, financial structure,
growth prospects, financial
performance, and size
 Valuation benchmarks
include multiples of:
- Revenue
- EBITDA
with “similar” acquisition
transactions
similar in business, industry,
and financial structure
 Value includes control
premium
 Valuation benchmarks
include multiples of:
- Revenue
- EBITDA
Copyright © 2006 Deloitte Development LLC. All rights reserved.
value of future free cash
flows
unlevered net income plus
non-cash adjustments, less
changes in working capital
and capital expenditures
purchase price in a
leveraged buyout transaction
markets, debt capacity, and
equity investor return
expectation
 Discount rate as determined
by the weighted average
cost of capital and financial
risk
2
Discounted Cash Flow (Includes Income Statement)
Income Statement
Net Sales
COGS
Gross Profit
R&D
SG&A
Depreciation Expense
Operating Profit
Interest Expense
Pre-Tax Income
Income Tax
Net Income
Please answer the following:
a) Present value of 2004-2009 Cashflows:
b) Present Value of Terminal Value:
c) Total Enterprise Value of XYZ:
The space below is provided for your model. Please show all work.
Data for ABC (Assume constant for the entire timeframe):
Operating Profit Margin
Taxes
Net Working Capital (% of sales)
Capital Expenditures (% of sales)
Depreciation (% of sales)
Terminal Growth Rate (of Free Cash Flow)
re = 18%
rd = 10%
WACC
14.4%
($ in MM)
Sales
NWC
25%
40%
10%
5%
5%
3%
2006
185.3
111.2
74.1
3.0
26.5
1.3
43.3
2.0
41.3
14.0
27.3
$
2006
185.3
2007
213.1
2008
245.1
2009
281.8
2010
324.1
2011
372.7
2012
428.6
2006
2007
2008
2009
2010
2011
2012
18.5 $
21.3
$
24.5
$
28.2
$
32.4
$
37.3
$
Terminal
Value
42.9
EBIT
Less: Taxes
Add: Depreciation
Less: Change in NWC
Less: Capital Expenditures
FCF
Years Out
Discount Factor
PV
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0.50
1.50
2.50
3.50
4.50
5.50
5.50
3
Comparable Transactions
Enterprise Value
Date
Announced
Acquiror
Target
12/18/06
Kimball Electronics Group
Reptron Electronics Inc
11/29/06
Nidec Corp
11/03/06
Sensata Technologies Inc.
08/31/06
Enterprise
Value ($mm)
Sales
EBITDA
49.7
2.8 x
9.4 x
Brilliant Manufacturing Ltd
134.6
1.9 x
6.6 x
914.9
3.9 x
12.7 x
Weichai Power Co Ltd
First Technology Automotive
and Special Products
Torch Automobile Group Co Ltd
300.0
3.6 x
20.3 x
05/23/06
Assa Abloy AB
Fargo Electronics Inc
686.9
2.4 x
11.7 x
02/01/06
Emerson Electric Co.
Artesyn Technologies Inc.
669.9
1.4 x
19.4 x
12/19/05
Honeywell International Inc
First Technology PLC
2,294.6
3.1 x
7.7 x
06/06/05
INSSEC
Cie Automotive SA
947.1
2.5 x
4.6 x
12/13/04
Honeywell International Inc
Novar PLC
254.7
3.5 x
13.6 x
10/25/04
Magna International Inc
Tesma International Inc
559.5
1.2 x
14.4 x
07/07/04
Emerson Electric Co.
406.0
2.7 x
n/a
05/12/04
Mitsuba Corp
Marconi Corporation PLC,
Outside Plant and Power
SystemsDenki
Business
Jidosha
Kogyo Co Ltd
90.0
2.6 x
n/a
Averages
$365
2.4 x
12.0 x
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$
4
Comparable Public Companies
Company Name
Johnson Controls Inc.
Magna International, Inc.
Denso Corp.
Siemens AG
Valeo SA
Aisin Seiki Co. Ltd.
Sumitomo Electric Industries Ltd.
PPG Industries Inc.
Average
Median
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Share
Price
$92.46
78.12
40.04
109.51
45.54
32.51
15.29
66.29
Market
Cap
$18,122
8,572
33,085
97,647
3,490
9,342
11,597
10,955
Net
Enterprise EV/
EV/
Debt
Value
Sales EBITDA
$4,450
$ 22,572 2.11X
9.83X
(663)
7,909 2.80X 12.68X
(797)
32,287 3.00X
9.21X
6,046
103,692 2.88X 11.89X
1,339
4,829 2.30X 13.01X
(123)
9,218 2.55X 11.12X
2,878
14,476 3.21X
8.10X
997
11,952 2.98X 12.33X
2.73X 11.02X
2.84X 11.51X
5
Range of Value Summary
2006 Sales
2006 EBITDA
Public Comps
Sales
EBITDA
Transaction Comps
Sales
EBITDA
Multiple
Value
DCF
Value
Range of Value:
Min
Max
Average
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Disclosure
Deloitte & Touche Corporate Finance LLC (“D&TCF”) is the U.S. corporate finance practice of Deloitte & Touche USA LLP, the US member firm of Deloitte
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