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Case Analysis: Fabricare, Inc.
Member rating: No Rating | Words: | Submitted: Fri Nov 12 2004
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Case Analysis: Fabricare, Inc. There are several methods that we used in arriving at a range of price options for the purchase of Fabricare, Inc. from Roy Tyson's perspective: 1. Cash Flow Valuation: Present value of future stream of cash flows from the point of view of Fabricare's current management 1 2. Cash Flow Valuation: Present value of future stream of cash flows if management of Fabricare is acquired by Roy Tyson 2 3. Earnings Valuation: Using Price-to-Earnings multiple of 8x for publicly-traded building maintenance firms 3 4. Revenues Valuation: Using Price-to-Earnings Ratio of 65% for publicly traded maintenance firms 4 In negotiating for the price of Fabricare, we recommend that Roy Tyson start with a bid which represents the opportunity cost of managing Fabricare from the point-of-view of the current owners. We therefore ask, "How much is the business (Fabricare) worth to its current owners?" with the objective of matching the said opportunity cost with...
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