The first page, will be an Executive Summary, which will state the problem faced by the company, and your recommended solution and why? Supported by some numbers that you had calculated in the body of the case. The executive summary is only one page long. Then you have to answer the questions and to provide the Excel spreadsheets with the calculations. Double spaced, fonts size 12. Don’t tell stories of everything you know about finance. Just focus on the questions. For the FCF, you only need to predict 5 years. You have to calculate the WACC, etc.
Spotless Group: Is it Worth A $1.15 Per Share? Questions
1. Why is Spotless (SP) such a potentially attractive acquisition opportunity for another facilities Management (FM) company provided it can be acquired at a reasonable price? What risks does the acquisition of SP bring for Downer?
2. Use the case information and the template in the student spreadsheet to undertake a free cash flow (FCF) valuation of SP stock on a standalone basis?
3. How much are potential synergies from the acquisition worth to Downer?
4. Use the comparable company data in Exhibit 9 to 11, to determine the value of SP Stock. How do these valuations compare with that derived from the FCF model assignment in Question 2? What are the limitations of these valuations?
5. Is the acquisition on the proposed terms value-enhancing for Downer? What recommendation should Mitchell make regarding the rights offering?
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