Estimation of Dollar Increase in DuPont Corporation's Value

M&A Case
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November 21, 2022
1 Questions
1 5% revenue growth per annum (versus 4% growth) in each of the next five years and improve the operating margin to 12% (versus 10%)
As provided in the case of DuPont Corporation, the company has set internal targets for its DuPont Performance Coatings Products (DPC) which include an increase in their operating margins and annual revenue growth from 10% to 12% and 4% to 5%, respectively. From exhibit 9, it can be seen that the current enterprise value of DPC amounts to $3,970 million. However, by adding the pertinent tax shields, the base value should be considered at $4,163 million. This would be the base price to be used for valuation.
Accordingly, applying these changes, the value would amount to $5,108 million, which refers to an increase of about $945 million. This refers to an increase in the total leveraged purchase value for the buyers themselves.
2 The division can be sold at 7.5x EBITDA in five years
Based on Exhibit 9, a change in the Terminal value from 7.0 to 7.5 would increase the value from the aforementioned base price of $4,163 million to $4,385 million. This represents an increase of $222 million after the change. Thus, this opens up opportunities for multiple arbitrages allowing the leveraged buyer to sell and get a ...