Electrolux and GE Appliances Case Study

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Electrolux and GE Appliances Case Study

Read the Electrolux and GE Appliances case study, which offers an analysis of the Electrolux’s
valuation process during its acquisition of GE Appliances in August of 2014. The Electrolux team
was tasked with completing a valuation and crafting a final offer for the GE appliance division. In
your short paper, you will describe the circumstances of the deal for these two companies,
conduct basic valuation calculations, and make a recommendation that would be communicated
to senior management. Prompt: Specifically, the following critical elements must be addressed:
I. Provide a detailed overview of the scenario, including the parties involved, the history, and the
specifics of the deal.

II. Calculate the total value of GE Appliances and Electrolux.
Hint: We are looking for the total value from Electrolux’s point of view. Look at PV values in
exhibits 7 through 9: Total Value = GE Appliances + Mabe Interest + Synergies
III. Using the projected seven-year valuation, calculate the range of values for GE Appliances.
IV. Do the terminal values support the merger? Looking at the numbers in the exhibit, do you
think the merger should happen? Is it a good investment? Support your answer with a full
explanation of why (or why not), with supporting financial information. Hint: There will be three
calculations: a preliminary calculation based on the case study, an expanded year valuation from
four to seven years, and an expanded calculation from four to seven years including NWC.
V. In reference to the tables above, if you were presenting to senior management and had to give
one number for each final valuation, what would those numbers be, and how would you arrive at
the numbers? Explain your answers. Hint: Think of final valuation as the conservative number.
For GE, you should look at 7-year TV, Capex, and NWC. For Mabe, use No TV and slightly
higher revenue growth, and for synergies, use the case numbers.
VI. In the end, did the merger go through or not? Research the outcome and explain what
happened.