Merger & Acquisition 1
The purpose of this assignment is to evaluate an acquisition. On July 1, 2015, Ace Ltd. agreed to acquire Chubb. Additional information can be found on Yahoo Finance and CSIMarket.com. The assignment is to analyze the acquisition and discuss the following questions.
In your own words, what is the business of each company?
What is the total purchase price? How is this calculated?
What is the PE multiple for the acquisition using 2014 earnings?
How will Ace finance the acquisition?
Is this a horizontal, vertical, or diversifying acquisition for Ace?
Explain your reasons.
Calculate the IRR for the acquisition assuming a 10, 20, and 30 year horizon. Use 2015 as CF0.
Calculate the value of the company using the EBITDA approach from the December, 2014 financial statements and the sources given below.
Calculate the enterprise value from the sources given below.
Show the results of these 3 questions in a spreadsheet.
Using these results is the purchase price of Chubb high, low, or reasonable? Why?
What are Ace’s reasons for the acquisition?
What are Chubb’s reasons to agree to the acquisition?
Would you advise Ace to acquire Chubb? Why or why not?
Do you think the acquisition will be profitable for Ace? Why or why not?