Question 1:
"Given the current ownership of ETP, what challenges might a large acquisition pose to the management team and capital structure?
Question 2:
Does the current majority ownership lend itself to a large acquisition? Why or why not?
DCF Valuation for ETP
Final Case Analysis - Energy Training Partners
Question 3: Using the management projections and the WACC from question 2, determine the enterprise value, total equity value, and per share value for ETP, using the DCF Management Projection Model (3 DCF Mgmt Proj ETP) worksheet.
Question 4: Using the same WACC as determined in question 2, determine the DCF value of ETP using a growth rate of 4% rather than 7.5%, while keeping the remaining assumptions from the management projections constant. Determine the enterprise value, equity value, and per share valuation using the DCF Modified Projection (4 DCF Mod Proj ETP) worksheet.
Maximum Acquisition Leverage for ETP
Final Case Analysis - Energy Training Partners
Question 5a: Using the assumptions below, determine the largest company, based on revenue, that ETP can acquire using only senior debt. Modify cell G4 in the Debt Capacity Model (5 Debt Capacity) worksheet, increasing size of acquisition, to determine the highest revenue size target that ETP can acquire with senior debt alone.
Question 5b: Using the assumptions below, determine the largest company, based on revenue, that ETP can acquire using only debt. Modify cell G4 in the Debt Capacity Model (5 Debt Capacity) worksheet, increasing size of acquisition, to determine the highest revenue size target that ETP can acquire without raising equity.
Question 5c: Using the assumptions below, determine the largest company, based on revenue, that ETP can acquire using only debt and an incremental raise of 25% incremental equity in the combined company. Modify cell G4 in the Debt Capacity Model (5 Debt Capacity) worksheet, increasing size of acquisition, to determine the highest revenue size target that ETP can acquire without raising more than 25% equity in the combined companies.
DCF Valuation for GPX
Final Case Analysis - Energy Training Partners
Question 6: Using the management projections and the WACC used in question 2, determine the enterprise value, total equity value, and per share value for GPX on a standalone basis using the (6 GPX DCF Mgmt Forecast) worksheet.
Question 7: Using the same WACC from question 2, determine the DCF value of GPX using a 6.0% annual growth, with a projected EBITDA margin of 9.5%. Utilize the other remaining assumptions from the management case using the (7 DCF Discount Growth Valuation) worksheet.
Final Case Analysis - Energy Training Partners
Question 8: Input the data from pages 8 and 10 from the case study into the (8 Purchase Price Premiums) worksheet. Determine the share price if ETP acquires GPX for a 30% premium over the most recent trading price (4/9/08 price).
Question 9: "Taking into account the historical trading range of GPX over the last year, the purchase prices of current shareholders, and the comparison to intrinsic values represented by the DCF valuations, do you think this 30% premium offer will be appealing to the majority of shareholders. Why or why not?"
Question 10: "Evaluating the current compensation of the senior management team and their equity holdings in the company, would this offer likely be appealing to senior management? Assume there are no additional compensation agreements, and senior management has a 50% chance of keeping their jobs post-transaction. "
Question 11: "Based on the acquisition criteria of ETP, the facts associated with GPX as presented in the case, and a comparison among the intrinsic values of GPX, its current trading price, and the likely premium required to acquire, does GPX appear to be an appealing acquisition candidate for ETP? Why or why not?"