Nokia India Battery Recall Logistics Harvard Case Solution & Analysis

Nokia India Battery Recall Logistics Case Solution 

  • Benefit from acquiring Landmark

There are many advantages which can be achieved from the acquisition, some of them are:

  • Through acquisition, Broadway will be able to provide better services to its existing customers. The market conditions exposed the consolidation and acquisition, which is necessary for growth. With this acquisition, Broadway will be able to grow and can offer better bundled services to its customers.
  • It can increase its market share through this acquisition by entering in high technological and biotechnological industries. Moreover, this will help Broadway to enter the eastern U.S market segment.
  • Landmark’s engineering and energy solution will greatly expand the services offering of the company. As a result,new customers will be attracted.
  • The acquisition will help the company in achieving its goal, to create an integrated facility management company and enter the west coast market.
  • Operating efficiency will be achieved with an estimated 3% increase in the operating margin of the acquired company by using the policies of Harris, the CEO and President of Broadway industries. Thus, the acquired company will become more profitable and creates greater prospect for Broadway.
  • Economies of scale will be achieved,thus many expenses and corporate overheads will be reduced. Net working capital will also be reduced.
  • Consolidating landmark’s brand name and goodwill with the existing company’s goodwill will enable the company to charge premium prices for its services, as a result it will be able to increase its revenue.

Justification of $120 million bid

Harris can justify the bid of $120 million by showing that Landmark’s value is much higher than the bid price. By using the data given and few assumptions made there on the value of Landmark is calculated under both optimistic approach and pessimistic approach.

Optimistic approach

Therefore, by using FCFF approach, the free cash flows of landmark are calculated, and subsequently the net present value is calculated. Under the optimistic approach, the NPV is calculated as $988.3 million, hence this shows that the company has great potential to generate significant future cash flows. As a result,comparing the bid to the net value of the company is highly justifiable. Moreover, the IRR is calculated as 61%, therefore Broadway will have high internal rate of return too. So, it could be said thatthe bid price is justifiable, considering other numerous qualitative benefits of acquisition.(FCFF, n.d)

Pessimistic approach

By using FCFF approach, the free cash flows of landmark are calculated using data given for Pessimistic approach, and subsequently the net present value is calculated. Under the Pessimistic approach, the NPV is calculated as $481.9 million. Therefore,even with the pessimistic approach, the cash flows are in positive figure and are highly favorable and this justifies the bid price. The IRR is calculated as 39% as well asthe decreased IRR is still acceptable. Therefore,the bid price is justified even in pessimistic approach.

There are two financing options available to Broadway; the first option is to finance entirely by debt and the second option is to use the combination of both debt and equity financing. ...................

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