Your
assignment includes: (a) perform a formal valuation of Carrols, determining a
range for the IPO price that is financially justified, and (b) negotiate with a
management team from Carrols. [Note: it is illegal to rebate any part of
your fees to Carrols management.]
Your legal advisor has informed you that there is a general legal
prohibition against fraudulent misrepresentations in these types of
dealings. When (and if) a deal is
consummated, you should get a sign-off on the terms of the deal from the
opposing team.
REQUIRED:
(1) Before the negotiation day: Prepare a formal report showing the
financial basis for the range of prices for Carrols, complete with explanatory
text, calculations, formulas and assumptions. For more details about the structure of
the report, see the attached list of requirements. This report is highly confidential. It is due in class on Wednesday
October 11. After your report is turned in, you will
be provided with an opposing team with which you must
negotiate.
(2) On or before the negotiation
day: You must submit a
completed Negotiation Form (attached at the end of this material) in class on
Monday
October 16. You must also submit a brief final
report describing the negotiations at that time. What factors moved you away from your
original price range? Justify the
difference between your beginning price range and the final
price.
(3) Grading: Your group grade will be determined as
follows:
50%
based on the quality of
the analysis in your written report.
25%
based on the quality of
the presentation of your report (organization, clarity, brevity, style,
graphics, etc.)
25% based on negotiation
points.
REPORT
REQUIREMENTS
FIRST
SECTION: Should discuss your overall opinion of
Carrols. You should mention the
main reasons or assumptions supporting your overall
opinion.
SECOND
SECTION: Should describe the types and results of
analyses performed on Carrols’s financial data. Examples would be:
·
current
conditions in the IPO market
·
pro-forma
financial statements
·
present
value of free cash flow
·
option
value of investment opportunities
·
value
changes due to changes in financial structure
·
price/earnings
ratio analysis
·
cost
of capital for Carrols
·
competitive
conditions in the food service industry
·
regulatory
and labor market factors that would affect firm value, if
any
·
control
issues associated with the ownership structure of Carrols
Note
that some of these factors may not be relevant to the analysis of
Carrols.
THIRD
SECTION: Should discuss your negotiation
strategy. What will be the main
arguments supporting your price range?
What defenses can your raise against the weaknesses in your
analysis?
IT
IS ABSOLUTELY PROHIBITED TO DISCUSS THIS CASE WITH ANYONE OTHER THAN MEMBERS OF
YOUR OWN GROUP. VIOLATING THIS RULE
CAN RESULT IN A ZERO GRADE BEING ASSIGNED TO THE VIOLATING GROUPS. (Besides, sharing information can
destroy your bargaining position.)
Carrols Negotiation
Form
Names
of people in your group:
Names
of people in Management group:
Initial
price offered to Management
group:
$
Initial
price requested by Management
group:
$
Final
negotiated price:
$
If
no deal was reached, enter the LOWEST
PRICE ASKED:
$
HIGHEST PRICE OFFERED:
$