Case Competition Solution

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Submitted By:

Team Spinal Tappers

Team Members:

1

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Interpretation:

A clear depiction of Profits in the Long Run (Year 2018-20) can be visualized from the above calculations.[Net Income/Net Investment].

However , for the year 2016-17 also we can expect a higher percentage as because its clearly mentioned in the Merger Details:

“If the merger takes place, we will immediately increase its leverage with a $110 million debt issue “

The highest price per share that we can pay for Livious Apparel is $60.52, Which is actually calculated by taking the average of all the Prices per Share for different Years i.e. 2016-20.

Its Given that “Livious Apparel has 7 million shares of equity outstanding “ and therefore we have calculated the Exchange Ratio by dividing the Total Number of Shares by Total shares of Equity Outstanding i.e. 5.609616485/7 (figures in millions).

Thus the Exchange Ratio comes out to be 0.80

• The shareholders being the real owners of a firm must be rewarded, and must be kept in mind every time while doing a Restructuring transaction.

• Shareholder value can be enhanced by increasing the EPS (net profit after tax and pref. div./ no. of outstanding equity shares). Further in case of Listed entity the market value is generally taken as benchmark. Recently the trend has been, that the Promoters are Looking for In-organic Growth , meaning More than Normal. 

• Considering Livious Apparel and the below mentioned table , it seems that the e-commerce segment is lagging behind (negative EBITA %).

• There Could also A separate Entity Incorporated to look Specifically after Women's

Clothing looking at the Demand of the Women Clothing.

• We Also recommend to Hive-off the Ecommerce division. Rename it, and start a fresh in order to achieve desired Level of EBITA. Considering the recent Development of internet across the Global E-commerce is set to see a Great boom.

Further , such New entity can be used as a Trading Agent on a Online Platform (Specialized in Clothing) like Amazon/Flip kart.

• Such a new concept would surely be a inch closer to Inorganic Growth.

• Currently it is booking through Non Stop. Which receives 15 % commission.

------Diversification of surplus resources of merged Entity in SPV form will reduce the risk and increase the market sentiment there by increasing profit.

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