Acova Radiateurs Harv Harvar ard d Bus Busin ines ess s Sch Schoo ooll Cas Case e# Case Software # XLS5!5
2951 295150 50
Co"ri$ht % 2010 &resident and 'ellows 'ellows of Harvard Colle$e( )o "art of this "roduct *a +e re"roduced, stored in a retrieval sste* or trans*itted in an for* or + an *eans-electronic, *echanical, "hotoco"in$, recordin$ or otherwise-without the "er*ission of Harvard Business School(
Exhibit 1A Current aret for :ecorative Radiators
Country
'rance er*an Bel$iu* 4nited in$do* 8tal, S"ain, Holland
Total Radiators Sold/Year
Deorati!e Radiators Share o" Total
(mm units)
% Units
% Units
2(20 5(50 1(00 6(73
15 9 3 5
25 15 10 !
Comments
Acova had .5/ of *aret ehnder was leader with 25/ *aret share Acova held !0/ of *aret Believed to have hi$h "otential )ot well develo"ed, +ut $rowth o""ortunities
Exhibit 1* 'orecasted aret rowth =volu*e>
Hot water radiators ;owel drers
1#$$1#$#
1##&
1##1
1##'
1##
1##
3(0/ 65(0 20(0
2(5/ 25(0 20(0
2(5/ 20(0 20(0
2(5/ 15(0 20(0
2(5/ 10(0 20(0
2(5/ 10(0 20(0
Exhibit 1C 'orecasted aret Shares in 'rench
Radiator aret + Co*"an Com+any
Acova ehnder ?ther@'ini*etal ((( aret sie
1#$#
1##
.5/ 25/ ''r 600**
5./ 1!/ 25/ ''r !60**
Exhibit ' Acova 'inancial State*ents =*illions of ''R> 1#$#
Sales ?ther "roducts &urchases@*aterial cost ?ther e"enses )et interest ;aes )et 8nco*e
1#$$
1#$,
77.(6 7(5 760(9 =106(!> =199(3> 73(5 =7(.> 72(! =12(9> 19(9
2!0(3 6(6 2!5(0 =!2(!> =1.6(7> 2.(9 =0(.> 2.(2 =10(7> 13(9
22.(7 1(5 22!(! =55(2> =161(3> 72(0 =1(6> 70(3 =16(5> 13(1
12(5 115(0 77(9 131(6 .2(5 277(9
5(2 100(1 77(. 179(0 55(3 196(3
10(. !0(6 1!(! 109(9 73(5 163(6
!!(1 5(0 5(7 7.(0 175(6 9!(5 277(9
.9(9 0(0 5(3 65(0 170(5 36(1 196(3
.1(. 0(0 3(. 15(2 97(3 52(! 163(6
29(0
2.(5
19(0
Assets
Cash Accounts receiva+le 8nventor &&< ;otal Assets 0iabilities
Accounts "aa+le :eferred ta &rovisions Ban de+t )et worth Lia+ilities and )et orth ther 2n"ormation
Ca"ital e"enditures
1#$-
1!7(2 2(0 1!5(2 =6.(.> =117(.> 27(! =0(6> 27(6 =11(.> 11(.
1#$.
166(5 0(0 166(5 =7.(6> =96(2> 17(0 0(7 1 7(2 =3(2> .(0
Exhibit Acova &roGections Based on AcDuisition :ate of ul 1,1990 =thousands of ''r> Atual 1#$#
Sales &ercenta$e chan$e &urchase@*aterial costs &urchase *ar$in &ercenta$e &roduction costs Co**ercial costs Advertisin$ e"ense Ad*inistrative e"ense ;rans"ortation costs &artici"ation salaries E*2T 8nterest inco*e of ;ar$et Co( ;otal interest e"ense AcDuisition costs &reta "rofit ;aes E 7./
1##&
77.,600 =106,971> 272,639 3!(90/ =96,6.2> =60,6!!> =13,!.0> =72,057> =10,122> =7,55.> 76,90. 7,799 =.,119> 0 71,1!. 11,579
Net income
:e"reciation A*ortiation of acDuisition costs Ca"ital e"enditures Chan$e in net worin$ ca"ital Cash flow available
Additional Balance Sheet 8nfor*ation orin$ ca"ital &ercenta$e of sales Cash
7!0,000 12(37/ =116,7!0> 235,320 39(90/ =103,600> =65,300> =19,000> =73,100> =11,600> =6,000> 67,120 !01 =1!,6!.> =7,777> 22,102 !,1.!
1##1
619,900 10(50/ =125,170> 296,..0 .0(20/ =115,976> =6.,!!0> =19,335> =7.,905> =12,59.> =6,!00> 55,9!9 317 =76,106> =7,777> 19,135 .,091
3ro4eted 1##'
637,990 10(50/ =17.,761> 723,369 .0(60/ =123,205> =50,2.6> =20,757> =79,!00> =17,920> =5,200> .0,!9. !52 =77,3.9> =7,777> 76,.7. 12,!57
222(500
27!(.!1
1,116 =71,337> 0 63,353 1.,237
1## 531,62. 10(00/ =133,1!2> 795,265 .0(60/ =152,.0!> =30,!72> =26,32.> =6!,15!> =13,!67> =.,000> !5,0.. 1,791 =29,1!6> 0 5.,2!6 21,195
19,648
13,924
12,074
21,884
29,394
36,089
11,.00 0 =29,000>
19,000 =7,777> =20,000> =.,!9!>
20,000 =7,777> =25,000> =.,631>
25,000 =7,777> =25,000> =!,265>
25,000 0 =25,000> =!,3.3>
25,000 0 =25,000> =9,566>
8,359
2,946
16,972
20,717
37,132 1!(.0/ .,500F
.1,030 1!(.0/ 2,700
.!,521 1!(.0/ 2,570
!3,.33 1!(.0/ 2,.!7
95,667 1!(.0/ 7,031
F ;he +alance of .,500 does not *atch the <hi+it 7 cash +alance of 12,500 +ecause Acova used 5,000 of cash to "a taes owed(
19.(532
1## 510,7!! 10(00/ =151,0.5> 759,717 .0(60/ =17!,!23> =55,701> =22,7!9> =67,.!0> =15,712> =3,500>
255(.52
2!2(10!
26,545
106,9!. 1!(.0/ 7,73.
19.(532
222(500
27!(.!1
255(.52
2!2(10!
1#$#
1##&
1##1
1##'
1##
1##
77. =105>
7!0 =116>
619(9 =125>
637(99 =17.>
510(7!! =151>
531(62. =133>
1#$#
1##&
1##1
1##'
1##
1##
77. =105>
7!0 =116>
619(9 =125>
637(99 =17.>
510(7!! =151>
531(62. =133>
Rf R* Beta Cost J Cost =:> net :e+t
10(03/ 5/ 0(! 16(03/ 9(30/ 7.(00/ 3(05/ 7.(00
Exhibit Acova &roGected :e+t Schedule =thousands of ''r>F 1##&
1##1
1##'
1##
1##
1##.
1##-
1##,
1##$
190,000 12,750 5,000 1!5,000
1!5,000 22,200 10,000 1.5,000
1.5,000 21,000 15,000 130,000
130,000 19,200 20,000 160,000
160,000 13,!00 25,000 115,000
115,000 17,!00 25,000 90,000
90,000 10,!00 25,000 35,000
35,000 .,!00 25,000 60,000
60,000 6,!00 60,000 0
Be$innin$ de+tSu+( de+t 8nterest "a*entsSu+( de+t =17(5/> &rinci"le "a*entsSu+( de+t
35,000 6,7!! 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 0 35,000
35,000 !,..5 35,000 0
Be$innin$ de+tC loan 8nterest "a*entsC loan =11/> &rinci"al "a*entsC loan
71,!00 1,.69 7,759 2!,661
2!,661 7,129 =.,056> 75,695
75,695 7,906 1,9.2 77,527
77,527 7,3!! .1. 72,!03
72,!03 7,309 1,565 71,231
71,231 7,679 !,075 27,223
27,223 .,!02 =13,01.> 2,555 !5! =1,.32> 15,626 27,!19 =63,330> .,!02 =13,01.> 70,367
Yearly Debt Shedule
Be$innin$ de+tSr( de+t 8nterest "a*entsSr( de+t =12/> &rinci"le "a*entsSr( de+t
F1990 fi$ures reflect a halfearKs worth of interest "a*ents, to reflect ti*in$ of transaction(
Exhibit .A :eal Structure =*illions of ''r> Soure
5undin6 3ro!ided
2 7 !0 35 190 760
7otes
Senior :e+t will have an interest rate of 12/ and an !(5ear ter*(
eanine :e+t will +e su+ordinated to senior de+t, have an interest rate of 17(5/, 9ear *aturit, with warrants such that the "roGected 8RR after 6 ears is 22/ with an eit &@< of 17(
Exhibit .A :eal Structure =*illions of ''r> Soure
5undin6 3ro!ided
2 7 !0 35 190 760
7otes
Senior :e+t will have an interest rate of 12/ and an !(5ear ter*(
eanine :e+t will +e su+ordinated to senior de+t, have an interest rate of 17(5/, 9ear *aturit, with warrants such that the "roGected 8RR after 6 ears is 22/ with an eit &@< of 17(
?ffer is conditional on satisfactor due dili$ence, satisfactor le$al audit on +rands and licenses, and a$ree*ent with *ana$e*ent(
Exhibit .* &roGected Returns to 8nvestors Assu*in$ <it :ece*+er 71, 1997 =*illions of ''r>
Business value AcDuisition loans eanine eanine share =12(9/> Barin$ Ca"ital share =.9(0/> 2RR alulations
eanine cash flow Barin$ Ca"ital cash flow a
30!(1a 115(6+ 35(0 622(. 77(5 56(6 776(! Year &
1
'
2RR
=35> =!0>
6(7!! 0
!(..5 0
!(..5 0
115(1!2 776(!
c
27/ 67/
CasewriterKs note 30!(1 M M 17( 8t a""ears that BC8 actuall used an
+
Assu*es warrants eercised in 1997 and "roceeds =17(0 ' fro* *eanine and 11(3 ' fro* *ana$e*ent> used to "a down de+t(
c
115(1!2 N 35(000 O !(..5 O 61(60.( ;he 61(60. co*es fro* the 56(6 of eDuit *inus the 17(0 to eercise warrants(
Yearly Disountin6
Closin6
1#$#
1##&
1##1
1##'
1##
622(. 330(503 0(730073 0(379936 0(!
Exhibit - aret 8nterest Rates =arch 1990>
4(S( Lon$;er* overn*ent 4(S( Short;er* overn*ent
!(.9/ !(31/
AAA AA A BBB BB B
9(77/ 9(32/ 10(11/ 10(51/ 12(.1/ 15(11/
'rance Lon$;er* overn*ent 'rance Short;er* overn*ent <chan$e Rate 4SP@''r
10(03/ 10(33/ 0(1.7!
Source Co*"iled fro* Standard Q &oorKs Bond uide, A"ril 1990 and :atastrea*
