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M&A Project Essay

7979 words - 32 pages

M&A Project

Table of Contents

1. Executive Summary 1
2. Introduction 2
2.1. History 2
2.2. Company structure 3
2.3. Products 4
2.4. Stock analysis 4
2.5. Competitors 5
2.6. Industry and Economic Trends Analysis 6
3. SWOT Analysis 7
4. Valuation 11
4.1. Weighted Average Cost of Capital 11
4.1.1. Re: Cost of Equity 12
4.1.2. Rd * (1-Tc): Cost of Debt 14
4.2. Pro Forma Forecasting 16
4.3. Discounted Cash Flow Valuation 19
4.4 Earning Valuation 21
4.5 Relative P/E Ratio Model 23
4.6 Synergy 26
5. Outcome and process of negotiations 28
6. References 30
7. Appendices 31

Executive Summary
The purpose of this ...view middle of the document...

The result from the SWOT analysis is that the firms are similarly aligned in both target customers and products offered. Therefore, acquiring Jos. A Bank would result in a gain in market share as well as cost synergies such as production, consolidation of retail stores, employees, and marketing.
The quantitative features are assessed using the following models to get the price per share of equity: the DCF model, earnings valuation model, and the relative P/E valuation model. From these models sensitivity analysis was applied to evaluate a conservative price range for negotiations with Jos. A Bank management.
Beginning the negotiations our offer price began at $61.52 using 3.26% growth rate and a 16.87% WACC from the discounted cash flow valuation method. During the negotiations we decided to change our evaluation to be based off of the earning evaluation to get closer to the asking price from Jos. A Bank’s management team. The final offer was $68 per share for Jos. A Bank, which was still below our estimated highest price of $74.33 per share.

1.1. History
The founder of Men’s Wearhouse George Zimmer, who was merely a college graduate when he made his first step into the apparel industry in 1971, got his start in Hong Kong working at his father’s raincoat factory for 6 months as a salesman. During those months in Hong Kong, Zimmer learned much about the retail industry and in 1973 Zimmer and his college roommates opened the first Men’s Wearhouse store in Houston, Texas. Men’s Wearhouse’s humble beginning as a men’s formal apparel store mainly selling polyester sports coats quickly proved to be a success in just a few short years. Utilizing his know-how in selling specialty clothing, George Zimmer opened his second store in 1974 and shortly after Men’s Wearhouse was in America’s living rooms in the form of TV commercials. During the 1980’s, Men’s Wearhouse rapidly expanded their operations and moved into its second geographic market, the San Francisco Bay Area. By the later part of the 1980’s, Men’s Wearhouse had established stores in the Pacific Northwest, Southwest, and Midwest parts of the U.S.
To continue their aggressive expansion model, Men’s Wearhouse issued their IPO in 1992, from which the capital raised helped fuel the expanding business. They also started to diversify their product lines by selling men’s shoes, business accessories, and casual apparel. By the mid 1990’s, Men’s Wearhouse was opening more than one store a week throughout the country. By the end of the decade, Men’s Wearhouse had over 450 stores and had purchased the Canadian men’s retailer, Moores the Suit People, and the men’s discount superstore, K&G. Men’s Wearhouse continued to capitalize on their opportunities to gain market share and currently have over 900 operational stores nationwide. Zimmer’s established vision and leadership has ambitiously crafted Men’s Wearhouse as a premier men’s apparel outlet and his steadfast commitment...

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