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the multiples price per share will give a result of $16.32.If Oracle will acquire Sun Microsystems, certain synergies would appear;oOracle will be able to utilize Sun’s Java in their own portfolio to createmany of their applications.oBy adding MySQL to Oracle company this will help them in addingsmaller cliental to their customer base.oThis acquisition will help Oracle to expand its products lines and risksoThere will be a combination of both companies Research andDevelopment (R&D) and also their sales teams.The below table shows the sensitivity analysis for the two approaches: Stand-Alone Sensitivity Analysis: Synergy Value Sensitivity Analysis:
21The sensitivity analysis for the synergy values using both the two methods perpetuitygrowth method (PGM) and the exit multiple method (EMM) show a higher enterprise valuethen the stand alone valuation preformed. Summary of Results: Based on the above sensitivity analysis, what can be seen is that in the Stand-Alone(Base Case) using the perpetuity method which gave us an enterprise value of 3,653 millionand an equity value of 5,465 million which resulted in a price of $7.40 per share which isclose to the price per share of Sun Microsystems. Also, what can be noticed when we usedthe multiple method for the Stand-Alone (Base Case) we got $9.44 price per share which hasa difference of only $2.75 ($9.44-$6.69). Therefore, the synergies valuation method was usedto receive the accurate results of share price. The synergy using perpetuity method which hasan enterprise value of 7,632 million and an equity value of 9,444 million resulted in a $12.79price per share. In addition, when using the multiple method for the synergy the price pershare of $16.32 shows a major difference between Sun Microsystems and Oracle’s offerprice.Enterprise ValueEquity ValuePrice per shareStand-Alone (Base-Case) using the Perpetuity method 3,653 million5,465 million$7.40Stand-Alone (Base- Case) using the Multiples method5,161 million6,973 million$9.44Synergy using the Perpetuity method7,632 million9,444 million$12.79Synergy using the Multiple method10,238 million12,050 million$16.32Comparable Company method$13.06Oracle’s offer price$9.50Sun Microsystem (Current Share Price)$6.69
226. If a competing bidder appears, how high a price should Oracle be willing to offer?
23companies’ analysis (CCA) and the price offered by Oracle are both contained within thesuggested range (prices are $13.06 and $9.50 respectively).All in all, we decided that the optimum price that should be proposed by Oracle is$11.38. This value was computed by finding the average of all the prices represented abovealong with the amount that is offered by Oracle ((8.42+14.55+13.06+9.50)/4= $11.38).7-