Acquisitions

Please use “Superior Printing” (Harvard Business School case, no. 9-800-197) for your response.

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Sorry to drop this in your lap, but I've got to fly to New York to work on the goReader deal.
To recap our conversation today:
1. Superior Printing has hired us to advise them on how to finance their acquisition of Buckeye Printing. Attached is a brief overview of Superior Printing and the pending transaction.
2. Our engagement deliverables are:
A. Financial Analysis:
- A financial analysis of various financing options.
- The options they have identified to fund the $1.6 mil price are 1. Borrow $1.0 mil from bank and have seller take a 5 year note for $600,000 or 2. They've found a VC willing to put in $2 mil for 35%.
- We need to suggest at least two other options and include them in the analysis. For instance, what if they turned to an angel investor for the $1 mil rather than the bank or VC; I think we know some people who would really like this deal. Hopefully you can think of another option to suggest.
B. Review and Recommendation Document:
- A review of each option including the pros and cons of each option as well as the risks.
- Recommend one option including a rationale supporting our recommendation and explaining why we are not recommending the other options.
- Identify and discuss any non-financial issues regarding the decision.
3. Regarding part A, I've emailed you the spreadsheet I worked up. It's not complete, but at least I got the first option fleshed out. You need to flesh out the other options including any additional ones we decide to consider. Hope you can figure out what I was doing; at least you don't have to start from scratch (unless you want to)!
4. Most of the assumptions for the spreadsheet can be found in the attached overview, but the spreadsheet includes some assumptions based on my conversations with Superior such as:
- Buckeye's profit before tax last year was $250K
- Superior's current long-term loan is at 9%; they renewed it last year as a 7 year term loan; it has 6 years left
- They have no bank line of credit; the current liabilities are things like taxes payable, lease payments payable, etc.
- If they go the VC route, they won't do the installment note with the seller. They'll pay the seller $1.6 mil and use the extra $400 to pay down the bank.

If you have any questions, send me an email. I'll check each night from New York. I'll be back on Monday; please have the spreadsheet and the recommendation document done by then. I think we'll do a recommendation document (in Word) rather than a PowerPoint presentation, but it's up to you.

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See attached files for complete problem.