This website uses cookies to ensure you have the best experience. Learn more

Timken Case Essay

1734 words - 7 pages

The Timken Company – a leader in the bearing industry, is considering acquiring the Torrington Company. Torrington Company, a leading manufacturer of needle roller bearings which is an engineering solution segment from Ingersoll-Rand. Both companies operate and compete in same business and therefore, Timken is seeking substantial operating synergies from this largest acquisition of its history. With this acquisition, Timken is increasing the size of company by almost 50 percent. And, Timken will continue to concentrate on what it do best by buying a company in an industry, where it has a leadership position built on decades of expertise. Timken expects to expand its worldwide business base ...view middle of the document...

). Therefore, The Company’s debt rating is expected to be A (Exhibit-6). Hence, Industrial yield for this rating is 5.84% (Exhibit-9) and is used as cost of debt for Ingersoll.
Cost of equity: Using CAPM [Rf+ β(Rm-Rf)], based on its debt rating , 4.97% is used as risk free rate of return (Rf). An average beta of the industry (0.85) is taken because it reflects the average risk of industry on the whole and hence is a better approximation for target’s risk. A market risk premium (Rm-Rf) of 5.9% is used as a common practice. See sheet 1 for WACCs for both Timken and Torrington.

Secondly, I used the estimated future cash flows of Torrington, from 2003 to 2007 to determine Torrington's current value. The FCFs for Torrington are assumed to grow at an average GDP growth rate 2.5% constantly forever after year 2007. Afterwards, Forecasted FCFs (NOPLAT+ Depreciation-Capital expenditure+ change in NWC) are discounted by Ingersoll’s (parent firm of Torrington) weighted average cost of capital 7.57. Hence, the PV of Torrington $1100.15 million is evaluated. sheet2: Stand-Alone Valuation of Torrington-DCF Method.

The second Stand-Alone Valuation approach is using Multiples. I used the information from exhibit 8 to process this valuation. The ratios of Enterprise value/ EBITDA are given on the exhibit; therefore the peer companies’ average Enterprise value/EBITDA is evaluated to be 7. Then, I calculated Torrington’s 2002 EBITDA to be $106.2(operating income +depreciation expense).Hence, Torrington company’s enterprise value $760 ($106.2*7=$760) million is estimated. In addition, the EV/Sales is also applied in my stand-alone valuation. The average EV/ Sales is 0.96 and Torrington’s 2002 net sales are $1204 million, therefore the enterprise value of Torrington is evaluated at $1154.7million with this approach. Sheet 3: Multiples valuation method

With-synergies valuation is also based on DCF analysis method. Estimated FCF is discounted by Timken’s WACC. If the two entities have the same business risk and Timken is the purchaser and surviving entity, we can use its WACC of 8.39% in the valuation, assuming same growth rate 2.5% as before. Analysts estimate that the $80 million in cost saving could be realized after the acquisition , however certain other costs associated with the integration approximately $130 million would occur .Hence, I take these cost savings and integration costs into consideration for the with-synergies valuation. Incorporating the effects of 80million cost savings for the merged firm (to be achieved by end of 2007 and assumed to incur in perpetuity then on) and 130 million integration costs (half of this accounted at the beginning years) in the estimated EBITs for Torrington, a new horizon value is estimated, the new FCF is discounted by acquiring company’s WACC 8.39%. Torrington company’s with- synergies valuation $1386.38 million exceeds the value as a stand-alone entity by approximately $286 million. sheet2: With-synergies...

Other Papers Like Timken Case

Hate Crime Laws Essay

2348 words - 10 pages Death of James Byrd”). While this particular case may give the appearance that perpetrators of hate crimes receive appropriate punishment, almost a decade later, one particular case demonstrates the inequity in the application of hate crime punishments: In 2007, Sean Kennedy of Charleston, South Carolina, left a bar around 3:45 am and was confronted by Stephen Moller, who called him a “faggot” and then punched him so hard in the face that his

Rational Emotional Behavior Therapy Case Study Conceptualization And Treatment Plan

2140 words - 9 pages Rational Emotional Behavior Therapy Case Study of Sarah: A Conceptualization and Treatment Plan Rational emotive behavior therapy, REBT, was developed by Albert Ellis and holds the central belief that the events in our lives do not cause our disturbances but that they are instead caused by our view of the events (Murdock, 2009). Murdock (2009) states that “people are seen as responsible for their behavior” (p. 279) but, because they are

Holidays In Albania

1636 words - 7 pages Have you ever thought about having exciting and incredibly cheap vacations? Albania might be the right choice. According to My Travel Guide, Albania is ranked the fourth among ten places worth visiting in Eastern Europe (“Top 10 Eastern European Destinations”). One can encounter three kinds of vacations in this Mediterranean country: winter, summer, and cultural. The ideal places to spend your winter vacations are the Albanian Alps. They are

A Heart Of Darkness

1748 words - 7 pages In this short story, there are frequent significant subject and ideas that make the story, "A Heart of Darkness," by Joseph Conrad, and haunting novel. The main theme is absolute white power over the natives. The theme validates the corruption, and the dependence caused by the white people as they took over the Congo. White men were giving all the power; they had no self-control, and in the end they did not use wisely. The white men became

The Aspects Of Vulnerability Among The Exploited In Medical Research

2287 words - 10 pages proceeding examples. The Willowbrook Hepatitis Studies was a case in which individual rights were severed and respect for one’s autonomy was lost. In 1947, in Staten Island, NY, Willowbrook was opened. Willowbrook State School was a state-funded institution for developmentally disabled children intended to accommodate approximately 4,000. By 1965, that number reached a population high of about 6,000. This high population mixed with a short staff led

The Hitchhiker’S Guide To The Galaxy

1171 words - 5 pages The Hitchhiker’s Guide to the Galaxy As the human race makes life-changing discoveries, it is made apparent that there is always more to learn as the universe, instead of becoming familiar, is becoming absurd. The Hitchhiker’s Guide to the Galaxy, written by Douglas Adams, as well as the 2005 film adaption, portrays absurdity to be an all-encompassing system in the universe. Through the introduction and attempt to understand lack of reason, the

The Ford Motor Company Wage Increase Of 1914 And The Theory Of Incentives And Efficiency Wages

1252 words - 6 pages doubling these wages can only be justified if, in some other way, it generates an equal or superior amount of value (either through a better product, lower costs, or both). According to the theory of incentives and efficiency wages, this is indeed the case, and Henry Ford even asserted that this decision was one of the best-cost cutting judgements they ever made (Raff and Summers 1987). This paper will outline the history of Ford Motor’s 1914

Historical Analysis Of The Economical Breakthroughs Of The Industrial Revolution

1396 words - 6 pages revolution, capitalism was used as the dominant form of economy in England. This helped England’s economy become consistent and organized throughout the country. However, it also posed certain, significant, problems. In order for the perfect capitalism to be achieved, every citizen had to begin equal. This was not the case, as many descendants of nobility and very early entrepreneurs started England's switch to capitalism with a lot more money than most

Leadership Portrayed in Monologue from Shakespeare’s Henry V

1214 words - 5 pages for their family and their country’s reputation. (Jacqueline and Milton, 2012)In real life case, a successful leader usually has good communication skill when talk to followers, people cannot influence their team members without connect communication to them. Language is a most powerful tool used by leader to manage and influence people in different industries. (Seargeant, 2009) Henry’s speech with unlimited energy and confidence, he cheers up

Cuba Civil Rights

1906 words - 8 pages Oct 2013. "World Report 2013 Cuba."Human Rights Watch.Human Rights Watch, 2013.Web. 14 Oct 2013. Wylie, Lana. "The Special Case of Cuba."International Journal 67.3 (2012): 661-84. ProQuest.Web. 9 Oct. 2013. "2012 Human Rights Reports: Cuba." U.S Department of State Diplomacy in Action.Bureau of Public Affairs, 19 04 2013.Web. 14 Oct 2013.

US Freight System

1273 words - 6 pages “Free Riders” are part of the business. When the Supreme Court decides a case that NITL has analyzed and promoted from the beginning, that decision applies across the land, everyone benefit from it. Bruce J. Carlton The League members pay a membership due every year, and they expect as a return a benefit, and whenever NITL accomplish goals, its members benefit but all the other shippers benefit as well. This is a threat that open the door

Related Essays

Timken Case Essay

1935 words - 8 pages sales were split as follows: 73% in North America, 17% in Europe, and 10% elsewhere. The company employed 10,500 workers at 27 plants worldwide, and served many diverse end-use markets, including automotive, consumer, general industrial, construction, agricultural, and natural resources. Brief introduction of the case In 2002, The Timken Company was considering acquiring The Torrington Company from Ingersoll-Rand. The acquisition would make a

Timken Case Study

644 words - 3 pages I. Statement of the Problem Timken Company has been a leader in the bearing company since the early 1900s began to seek ways to expand in 2002. They came up with the decision to acquire a subsidiary of Ingeroll-Rand called Torrington Company, another producer of metal bearings. The acquisition seems to be the right move since the two companies share 80% of the same customers and have a 5% overlap in products they offer. The problem arises when

Business Research Methos Essay

3560 words - 15 pages >cases Akron Children’s Hospital, Part A >Abstract Northeastern Ohio is a highly competitive health-care market, especially for the care of seriously ill children. With powerhouse health care institutions like the Cleveland Clinic venturing into the children’s care segment, Akron Children’s needed a way to differentiate itself. The research profiled in this case helped develop the positioning of Akron Children’s hospital and its promotional

Freedom And Responsibility Essay

2141 words - 9 pages amendment is “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercises thereof” (Jordan, 1999). Therefore, the first amendment states citizens have freedom of religion and exercises of the religion. The article entitled “Lawsuit alleges FBI violated Muslims’ freedom of religion,” published by Jerry Markon, Washington Post Staff Writer, justifies the detailed case of the FBI surveillance targeting Muslims for