FIN 595 Advanced Corporate Finance
Case Assignment: Made for each other
General guidelines relating to case reports are in the syllabus. Here are the key points:
This case report is an individual assignment. You may discuss the case with your
classmates. However, ultimately, the work must be your own, and each of you must
submit a separate report. Note that this means that the final case report must be written by
you and yourself alone strictly in your own words.
You may post questions or comments about the case in the discussion forums on D2L.
However, please do not ask for or provide detailed answers. Please keep the discussion in
You may use the internet for research. However, obtaining case solutions off the internet
or a solutions manual or any other source is not allowed. Any such effort will be
considered a violation of academic integrity and dealt with in accordance with the
policies specified in the syllabus.
Type up your submission in double space with 1inch margins, and upload your file(s)
into the appropriate D2L dropbox. Your main submission should be in the form of a pdf
file or a Word document. This should be supported by detailed calculations in a separate
spreadsheet file (such as an Excel file). Note that your spreadsheet file should contain
Excel formulas that reference the raw data rather than just typed in values.
Report content and format:
Your report should consist of the following:
A. Briefly, summarize the key facts of the case, identify the problem/decision, and explain
why it is important.
B. Based on the data and information provided in the case, please respond to the following
1. Using the formula for free cash flow, explain the various reasons why firms
undertake mergers and acquisitions. Which of these reasons are most likely to
apply to the acquisition that Metallic Creations Inc. is considering?
2. Using the free cash flow method of valuation, calculate the maximum offer price
that Metallic Creations Inc. would be justified in making for New Horizon
Products. Note: For this question and all subsequent questions, take into account
any synergy between the two firms.
3. Suppose that Metallic Creations Inc. is able to close the deal by either (i) paying a
purchase price of $950 million in cash, or (ii) exchanging one of its shares for
three shares of New Horizon. Should Metallic Creations use cash or stock as the
payment mechanism? Provide detailed calculations to support your
recommendation. What are the pros and cons of each payment mechanism for the
acquiring and the target firm respectively?
4. If New Horizon Products wants to block the takeover attempt what can it do?
Explain the rationale and possible outcome of each suggestion.
5. What are some tax issues that must be considered by Metallic Creations Inc.’
management team when making the bid?
6. One M&A committee member told Jassir that the main advantage of this deal to
Metallic Creations Inc. is the diversification benefit that exists from the two
companies being in totally different industry sectors, and that Jassir should really
stress that point in his presentation. Do you agree? Explain.
C. What would you recommend to the Board of Metallic Creations? Should they go
ahead with this acquisition? Justify your recommendation by highlighting the key
results of your analysis. Also, include any limitations of the analysis.