HgCapital and the Visma Transaction (A) Harvard Case Solution & Analysis

HgCapital and the Visma Transaction (A) Case Solution

Problem Background

The case reveals the importance of acquisition for a particular entity and shows the related estimated results in order to take over the company through the proposed analysis. Over here, Hg Capital wanted to acquire Visma as it knew that its operations were not expanded in Europe and believed that the acquisition could fill the proportion in the European markets.

Hg Capital was aware the technological companies werevery successful during thosedays and Visma was one of the leading software houses in Norway which was founded after the merger of three companies which areMultisoft, SpecTec and Dovre.

The company also conducted the historical performance of Visma and analyzed the future benefit from the projected results, as well asthe company has been performing well in the software industry in Europe and U.K.

Although the estimated value to acquire was between 2 to 3 NOK billion, as well as Hg Capital generated high revenues and an expected 13.4% revenue for Visma. However, the threat was very clear to Hg Capital asit had not established itsoperations in Europe.

Hg Capital believed that the investment could be valuable to expand the business into the European markets, as well as acquisition would increase the revenues up to 30%per year of margin. Its initial analysis revealed that Visma could be an attractive business for Hg Capital in order to improve its performance.

However, the investment wouldrequire high leverage buyout ratio in order to acquire Visma and the post-acquire activity could made the company as an independent entity. Humphries is the current CEO of Hg Capital and his performance in the company is reason of the highest level of growth in the entire history of the company.

In other case, Sage was bidding to acquire Visma, and itsfinal offer analyzed the period of two to three weeks from the day of bidding which put pressure on Humphries. Therefore,in order to outbid the offer of Sage, Hg was preparing to counter bid the offer and tried to value the company by offering more as compared to the counter party.

Thus,the issue was created by another bid and hence, it had to made quick decision about the investment opportunity of Visma. Finally, the company was engaged to project the future results of Visma and triedto overcome the threat of counter bid by Sage.

Company Valuation

The analysis shows the expected value of the company acquired by Hg Capital, which indicates that the results might be beneficial for the company as well as it analyzed the expected performance in order to know the future value of Visma.

Projected Income Statement

The results from the past performance determine the projected value of EBITDA and Net income for the company. In 2005, the company increasedits sales to 14% as compared to the past years. The sales volume should be allocated in the future values and it can grow at the same rate over the period of five years.

The net value of EBITDA was not good as compared to the historical data, therefore the expected value can be analyzed by the current EBITDA ratio as given in the case. This value could affectthe overall value of the company. Moreover, itshows that the comparable can be related to finalize the net value of Visma.

The marginal tax rate was 30% in the previous years and it is expected to be the same in the future, where the net income can be calculated by deducting the EBIT from Tax value. However, the overall result shows that the performance will vary according to the changing values in EBITDA and the volume of sales.............

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