Thoma-Bravo–Citect-Corporation-Take-Private Harvard Case Solution & Analysis

Thoma-Bravo--Citect-Corporation-Take-Private Case Study Solution

Strategic Buyer

Pros

Schneider Electric S.A.can create value for the company by realizing the synergies via acquisition due to their similarities with the ability to omit the redundant function and target. The Schneider Electric S.A. can also create operational synergies and help in improving the efficiency to greater extent. Furthermore, the Schneider Electric S.A. would better access to the capital and they tend to offer cash, stock or a combination of two in payments of the purchase price. The strategic buyer would come up with the market share, tie-ups and expertise, which in turn gives a significant benefit to the company.

Cons

On the other hand, the strategic buyer might not be the best fit for the company. There is a likelihood that the interest of strategic investor would diverge from the Citect Company’s interest, hence leading to the diminished support of investor for the company. The strategic investment might prove to be a bad decision in case the due diligence is not done properly and the inputs are not critically examined.

Financial Buyer

Pros

Thoma Bravo would make significant investment in Citect Corporation with the long term goal of reaping operational, strategic and financial returns.It would lead the company to have a strong competitive edge and impressive future growth potential. Thoma Bravo would bring multiple benefits to the company. It would also bring resources to the company as alternate sources of capital, increased operating efficiencies and improved financial disciplines.

Cons

In contrast, the investment from financial buyer might result in the loss of management control in Citect Corporation. The company might lose its direction, and control of basic elements such as hiring and firing employees, setting strategy and choosing management team. The company would be left with nothing and lose its ownership after being acquired by the financial buyer.(Marc Martos-Vila, 2012).

Recommendations

After taking into consideration the valuation of the Citect Corporation using two rates of WACC with constant inflation rate, the valuation shows positive Net Present Value in both cases, which shows that the acquisition would be the significant mean of growth for the business and it would drive superior operating results and long term value for the company. It is to suggest that the company should win the deal by offering price ranging between A$1.91 and A$3.36, it would allow Citect Corporation to receive the takeover offer from Thoma Bravo over Schneider Electric S.A.

Appendix A

TB Financial Projections for Citect Corporation
(A$ millions)
FY ends 12131
£2006£2007£2008£2009£2010£2011£2012
Revenue
Scada Licenses$27.7S28.2$28.8S29.4S29.9$30.5$31.1
Ampla LicensesS6.1$8.5Sti.5S13.7S16.1$17.7S18.8
Support Contracis$14.7SI8.4$22.1S25.4S29.2$31.3$33.4
Professional Services$24.5S24.7$25.0S25.2S25.5$25.8S26.0
Total Revenue$72.9S79.8$87.3S93.7$100.7$105.2$109.4
COGS$24.7S26.3$28.1S29.6$31.4$32.5$33.6
License Gross Profit$28.9$31.4$33.9$36.2$38.5$40.2$41.5
Support Gross Profit$10.1S12.6$15.7SI8.1S20.8$22.2S23.8
Services Gross ProfitS9.3$9.6$9.6$9.8S10.0$10.2S10.4
Total Gross Profit$48.3SS3.6$59.3S64.1S69.4$72.7S75.8
R&DS6.9$7.6$8.3$8.9$9.6$10.0S10.4
Sales & Marketing$12.4S13.6$14.8S15.9St 7.1$17.9S18.6
G&A$14.4S15.5$16.4S16.7SI8.5$19.4S19.9
Total Operating Expenses$33.7$36.7$39.5$41.5$45.2$47.2$48.9
EBITDA$14.6S16.9$19.7S22.6S24.2$25.5S26.8
D&Al.71.902.I2.202.202.302.40
EBIT$12.9S14.9$17.7S20.4S21.9$23.2S24.4
Tax (32%)4.1284.7685.6646.5287.0087.4247.808
Profit after tax8.77210.13212.03613.87214.89215.77616.592
Working capital4.95.45.96.46.87.37.6
Capital expenditures2.22.22.32.32.42.52.5
D&Al.71.902.I2.202.202.302.40
Free cash flows3.3724.4325.9367.3727.8928.2768.892
Terminal value211.96047
Discount period0123456
Discount factor1.00000.93630.87670.82090.76860.71970.6739
Discounted Free Cash Flows3.3724.149812735.20416896.05161896.065995255.95613075.9920018
Discounted Terminal Value142.8326019
Enterprise value/net present value179.6243303
Weighted average cost of capital6.80%
Growth rate2.50%

Appendix B

TB Financial Projections for Citect Corporation
(A$ millions)
FY ends 12131
£2006£2007£2008£2009£2010£2011£2012
Revenue
Scada Licenses$27.7S28.2$28.8S29.4S29.9$30.5$31.1
Ampla LicensesS6.1$8.5S11.5S13.7S16.1$17.7S18.8
Support Contracis$14.7S18.4$22.1S25.4S29.2$31.3$33.4
Professional Services$24.5S24.7$25.0S25.2S25.5$25.8S26.0
Total Revenue$72.9S79.8$87.3S93.7$100.7$105.2$109.4
COGS$24.7S26.3$28.1S29.6$31.4$32.5$33.6
License Gross Profit$28.9$31.4$33.9$36.2$38.5$40.2$41.5
Support Gross Profit$10.1S12.6$15.7SI8.1S20.8$22.2S23.8
Services Gross ProfitS9.3$9.6$9.6$9.8S10.0$10.2S10.4
Total Gross Profit$48.3SS3.6$59.3S64.1S69.4$72.7S75.8
R&DS6.9$7.6$8.3$8.9$9.6$10.0S10.4
Sales & Marketing$12.4S13.6$14.8S15.9St 7.1$17.9S18.6
G&A$14.4S15.5$16.4S16.7SI8.5$19.4S19.9
Total Operating Expenses$33.7$36.7$39.5$41.5$45.2$47.2$48.9
EBITDA$14.6S16.9$19.7S22.6S24.2$25.5S26.8
D&Al.71.902.I2.202.202.302.40
EBIT$12.9S14.9$17.7S20.4S21.9$23.2S24.4
Tax (32%)4.1284.7685.6646.5287.0087.4247.808
Profit after tax8.77210.13212.03613.87214.89215.77616.592
Working capital4.95.45.96.46.87.37.6
Capital expenditures2.22.22.32.32.42.52.5
D&Al.71.902.I2.202.202.302.40
Free cash flows3.3724.4325.9367.3727.8928.2768.892
Terminal value121.524
Discount period0123456
Discount factor1.00000.90910.82640.75130.68300.62090.5645
Discounted Free Cash Flows3.3724.0290914.9057855.5386935.3903425.1387455.019302186
Discounted Terminal Value68.59712988
Enterprise value/net present value101.9910879
Weighted average cost of capital10.00%
Growth rate2.50%

Appendix C

Share Price Calculations
Share price calculation with low extreme NPV
Number of outstanding shares (Diluted)53319800
Enterprise value179624330
Share price3.368811023
Share price calculation with high extreme NPV
Number of outstanding shares (Diluted)53319800
Enterprise value101991087.9
Share price1.912818276

 

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.

Other Similar Case Solutions like

Thoma-Bravo–Citect-Corporation-Take-Private

Share This