Explore BrainMass
Share

Acquisition Decisions at Kellogg's

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Kellogg Co. agreed to acquire Keebler Foods Co. for $3.86 billion, or $42 per share.

How would discounted cash flow analysis be used in analyzing such a major acquisition decision?

What were Kellogg's objectives in the acquisition?

What kinds of qualitative issues could enter into the decision?

© BrainMass Inc. brainmass.com October 24, 2018, 10:03 pm ad1c9bdddf
https://brainmass.com/business/discounted-cash-flows-model/acquisition-decisions-at-kellogg-s-147042

Solution Preview

How would discounted cash flow analysis be used in analyzing such a major acquisition decision?

DCF analysis separates the company's value drivers over a multi-period forecast, forcing the analyst to consider all facets of the company's operations. Projected after-tax unlevered free cash flows and terminal value are discounted by the weighted average cost of capital (WACC) to arrive at Enterprise Value. Additionally, projected after-tax levered free cash flows can be discounted by the cost of equity to value the equity directly. DCF analysis is widely used for its flexibility in handling different patterns of cash inflows and outflows, and its focus on future operations.

Often times in industry, DCF analysis is done to provide a sanity check for a given valuation. The price per share derived ...

Solution Summary

How would discounted cash flow analysis be used in analyzing such a major acquisition decision

$2.19
See Also This Related BrainMass Solution

Strategy Implementation and Control

You are part of a company who has made the strategic decision to acquire another company. There are two possible implementation strategies for this decision:

A. Merge the acquired company into your company. The result of this strategy will be one company containing the elements of both companies.

What are the pros and cons of this implementation strategy?
How will you know if the strategy is working?

B. Operate the acquired company as a separate business entity. The result of this strategy will be two separate companies under one senior management "umbrella" (the senior management team that is responsible for running both companies).

What are the pros and cons of this implementation strategy?
How will you know if the strategy is working?

View Full Posting Details