assessment of an acquisition in thailand 251869

1. Using a spreadsheet, determine the NPV of the acquisition of Skates’n’Stuff. Based on your numerical analysis, should Blades establish a subsidiary in Thailand or acquire Skates’n’Stuff?

2. If Blades negotiates with Skates’n’Stuff, what is the maximum amount (in Thai baht) Blades should be willing to pay?

3. Are there any other factors Blades should consider in making its decision? In your answer, you should consider the price Skates’n’Stuff is asking relative to your analysis in question 1, other potential businesses for sale in Thailand, the source of the information your analysis is based on, the production process that will be employed by the target in the future, and the future management of Skates’n’Stuff.

MINI CASE

Recall that Ben Holt, Blades’ chief financial officer (CFO), has suggested to the board of directors that Blades proceed with the establishment of a subsidiary in Thailand. Due to the high growth potential of the roller blade market in Thailand, his analysis suggests that the venture will be profitable. Specifically, his view is that Blades should establish a subsidiary in Thailand to manufacture roller blades, whether an existing agreement with Entertainment Products (a Thai retailer) is renewed or not. Under this agreement, Entertainment Products is committed to the purchase of 180,000 pairs of ?oSpeedos,?? Blades’ primary product, annually. The agreement was initially for 3 years and will expire 2 years from now. At this time, the agreement may be renewed. Due to delivery delays, Entertainment Products has indicated that it will renew the agreement only if Blades establishes a subsidiary in Thailand. In this case, the price per pair of roller blades would be fixed at 4,594 Thai baht per pair. If Blades decides not to renew the agreement, Entertainment Products has indicated that it would purchase only 5,000 pairs of Speedos annually at prevailing market prices.

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