Orcle Obtains Sun Case 2 Mergers & Acquisitions.docx - CASE...

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CASE 2Sun Microsystems
Executive SummaryMargaret Madison with Oracle’s corporate development team is trying to determine whether ornot the company should obtain Sun Microsystems. The goal is to acquire the company at a discount and seek benefit from this merger. Oracle also wishes to expand and diversify their organization. SM is different in that their area of expertise is hardware, storage, and providing service. In valuing the company, we look more closely at discounted cash flows to determine stand-alone and pricing with synergies. To be consistent with Oracle’s goal of conservative pricing, we assumed Margaret’s perpetuity growth rate of 4.8% and sales of approximately 3%. In doing so, the stand-alone price came to $4.60 per share. With synergies, it was estimated that there would be a loss of operating income of approximately 45 million in 2009. However, by2011 net operating profits would increase up to 500 million. After calculating the assumption with synergies, the price was determined to be at $6.29 per share. Therefore, Oracle’s goal in seeking to benefit from this acquisition is on target.Thank you Margaret Madison for contacting us here at Financial Helpers. I understand that you are having difficulties deciding what would be the best course of action to take in regard to

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