These cases are like embarking on an adventure. You are given information and you are to piece together a story as you build your financial statements and arguments around the information a bit at a time. See what insights you can glean as you interpret and quantify the outcomes from each piece of information. You may be required to do research on a company in a case in order to gain additional confidence in your conclusions. Don’t be afraid to use the financial literature to bring credibility to your analysis.
In several cases, the use of formulae and terms may differ from the terms you are familiar with from your financial texts or even the current course text. Don’t be confused by this. Different texts use different terminology. Simply go back to your finance texts as references and find the context for the equations to reconcile the differences. There are only a few important financial equations that we use in these analyses.
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Here are some questions you should consider and incorporate in your analysis.
- Using the case and the supplementary data in Appendix 1, how do you see FVC’s situation? What are the strengths and weaknesses of FVC and RSE? Why should the two companies want to negotiate?
- What is FVC worth? What are the key value drivers?
- What opening price do you think Flinder should offer to sell the company to RSE? At what price should he walk away from the negotiation? How did you estimate those values?
- Do you recommend that RSE pays in cash or stock? If stock, what exchange ratio do you recommend?