Landmark Facility Solutions Harvard Case Solution & Analysis

Landmark Facility Solutions Case Solution

Introduction & Problem Identification

The Broadway Industries Company was founded by Tim Harris in the year 1992. The company is located in the USA. The Broadway Industries’ operations include providing facility services such as janitorial services, floor and carpet maintenance services and building maintenance services. In last few years, the Broadway Industries has been experiencing significant growth and expansion in different states like New England and Florida by providing additional services to educational and industrial sectors in the facility solution market.

The CEO and President of the Broadway, Harris’ motto is to expand the operations of his company and to increase the facility support services to building engineering and energy solution. For this purpose, the CEO and the President of the Broadway industries is considering acquiring the Landmark Facility Solutions which will help the top management of the Broadway Industries to fulfill its target to expand and grow the operations of the company.

Background of Landmark Facility Solutions:

Landmark Facility Solutions was found in 1954 having specialization in providing commercial building, engineering and energy solution services. The Landmark Company has significant brand recognition throughout USA and due to its strong customer base and loyalty; the company is capable to charge premium prices to its customers. Although the company is charging premium prices however,the company is currently facing the problem of reduction in operating profit.
The Landmark’s current financial position has encouraged Mr. Harris to acquire the company because it is expected that the acquisition of the Landmark will not only help the Broadway Company to expand its operations but also the profitability of the company. The management of the Broadway has different perceptions and have disagreements, some members in the management of the company suggested that the current demanding consideration of $120 million from the Landmark is very high and they feel that the future expected benefits from the acquisition will not be higher than the amount invested in the acquisition and therefore the acquisition will not justify the purchasing cost. In addition to this, Mr. Harris is facing a challenge with respect to the financing the proposed acquisition.
Currently, he is considering the option of completing debt financing of the acquisition or a combination of both debt and equity financing. Broadway and its management have to finalize one option from the available options of the financing and identifying which one is suitable if the acquisition process may proceed.

Does Broadway Benefit from Acquiring Landmark?

The management of the Landmark has clear stance that any proposal less the $120 million will not be accepted from their side. The forecasted financial statements of the Landmark Company without being acquired by the Broadway Company shows that the net sales of the company are expected to grow at the level of $441 million in the five year time period of the company. It is also expected that it will also generate positive incremental cash flows in this period. However, after the acquisition the forecasted financials of both companies are expected to give different results.
In order to calculate the realized benefits from the expected acquisition, certain assumptions have been taken and for this purpose the net present value of the forecasted free cash flows is calculated. In order to calculate the realized benefits on the basis of time value of money appropriate discount factor is calculated by using Weighted Average Cost of Capital (WACC) and the capital asset pricing model (CAPM).................

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