Brown-Forman Acquisition Case Study

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BROWN-FORMAN DISTILLERS CORPORATION

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CASE STUDY |

Contents

EXECUTIVE SUMMARY 2

BACK GROUND 2

QUALITATIVE ANALYSIS 3

Key Industry Success Factors 3

SWOT Analysis 3

Porters Five Forces Model 4

QUANTITATIVE ANALYSIS 5

Price Earnings Valuation Method 5

Gordon’s Growth Model Valuation Method 5

Price/Book Valuation Method 6

Fair market Price Method 6

Discounted Cash Flow Method 6

Free Cash Flow Method 6

RECOMMENDATIONS 7

APPENDICES 7

Appendix 1: Summary Key Industry Success Factors 7

Appendix 3: SWOT analysis of Brown-Forman and Southern Comfort 8

Appendix 4: Industry Opportunities and Threats 8

Appendix 5: Southern Comfort Income Statement 9

Appendix 6: P/E Valuation Calculations 9

Appendix 7: Gordon Growth Valuation Calculations 9

Appendix 8: Price/Book Value Method Calculations 10

Appendix 9: Discount Cash Flow Valuation Method 10

Appendix 10: Free Cash Flow Method 10

REFERENCES 11

EXECUTIVE SUMMARY

The aim of this report is to ascertain if Brown-Forman Distillers should proceed with the purchase of Southern Comfort. Different valuation methods are used, and the results are the same. The asking price of $94.6milion is too expensive accordingly to the Discounted Cash Flow method, Book value Method and Price Earnings ratios. The qualitative analysis supports the quantitative analysis by using SWOT analysis in an effort to expose any synergy that may exist between the two companies. Key success factors are also considered to see the viability of the acquisition in terms of factors that will be key to ensuring the success of new organisation.

Firstly an evaluation of Southern Comfort will be done to determine the reasonableness of the $94.6million asking price. Then the effects of the acquisition on Brown-Forman share price will be analysed, and also supported by how Brown-Forman have chosen to be positioned among its competitors.

BACK GROUND

The case study outlines the key...