AirThread Connections Harvard Case Solution & Analysis

Air Thread

What is the stand-alone value of Air Thread under the acquisition plan (including the financing component) ignoring any synergies?  Note: given the changing capital structure as the firm expects to pay down debt after the transaction, you might consider an APV valuation approach.

airthread case solution

airthread case solution

The stand-alone value of Air Thread under the acquisition plan calculated through APV valuation approach is attached in Exhibit-B.

 What is the incremental value associated with forecasted synergies and what is your best estimate of the total value of Air Thread under the acquisition plan?  How much of this value can be attributed to the incremental interest tax shields associated with the financing proposal under the purchase plan?

The incremental value associated with forecasted synergies is attached in Exhibit-C.

How sensitive is your estimate of the value of the purchase price to the realization of synergies as outlined in the case – e.g. what if they are not fully realized?

The estimation with synergies is attached in Exhibit F.

Is the proposed capital structure feasible?  By feasible I mean, can the company reasonably expect to meet its interest and principal obligations as outlined in the case?  Provide an analysis to justify your answer.

The proposed capital structure is feasible, therefore the company can reasonably expect to meet its interest and principal obligations and working is attached in Exhibit I.

Propose an alternative capital structure for the acquisition that is more feasible than the one proposed.  How does your new capital structure choice affect the value of the transaction?

The New capital structure affects the value of transaction in the mix of debt and equity. Due to different capital structures, the value of WACC will be different that will affect in discounting of cash flows. Working is attached from Exhibit-A

What should ACC’s first offer be for Air Thread?  What is the maximum amount that they should be willing to pay to make the acquisition?......................

The purchase price of approximately $10,322.98 based on DCF model should be near intrinsic value. Working is attached in Exhibit-G.

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