Merger valuation and synergy forcasting


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I need direction on coming up with maket value of a division of one company that is being considered for aquisition by another. Discounted cash flows and multipliers must be used together. I am attaching the case, my spreadsheets, and what I have so far on the report. I do not believe my DCF for torrington are right either. I do not kInow how to pull the information together to make a purshase price recomendation nor do I know an approach to the best capital structure mix for the company make the purchase. I am truly struggling with this case. Please help. Document Preview: UVA-F-1472 Rev. Aug. 28, 2008 This case was written by Professor Kenneth Eades and Ali Erarac (MBA ’04). It was prepared as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2005 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 8/08. ? THE TIMKEN COMPANY In 2002, The Timken Company was considering acquiring the Torrington Company from Ingersoll-Rand. The acquisition would make a clear statement to the market about Timken’s commitment to remain a worldwide leader in the bearing industry by combining more than 100 years of bearing manufacturing and development experience. Because the two companies shared many of the same customers but had few products in common, customers would surely appreciate that Timken’s sales representatives could meet more of their needs. Timken’s potential annual cost savings from consolidating manufacturing facilities and processes were estimated to be more than $80 million. If the price paid for Torrington were too high, Ingersoll-Rand, rather than Timken, would capture the value of the synergies. In addition, given the large size of the acquisition, Timken was concerned about the impact on its balance sheet. If Ingersoll-Rand demanded a cash deal and if Timken raised the money with new debt, the increased leverage would almost certainly prompt credit agencies to downgrade Timken’s investmentgrade rating. The Bearing Industry Bearings of various sizes and specifications found their way into everything from space shuttles to household appliances, automobiles, dentist drills, roller... Attachments: Timken-Case-S....pdf Mar 19 2012 12:36 AM


Solution ID:608968 | This paper was updated on 26-Nov-2015

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