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Model solution: Exam Cases Corporate Finance – Prof. R. Aernoudt - 23/05/2019
Case NV Watchyou
Name : Aernoudt First Name Rudy N°1
Read page 215 to 219. Only write on foreseen space. Rest will NOT be read!!
What happened to Watchyou. Due to the due diligence, the turnover was
considered too optimistic. Year 1 was needed to do the investments as foreseen, and
ship the products from China. But sales would only start in year 2, estimated at 10
000 units; year 3, 20 000 units. But once really started, from year 4 onwards, the
estimated sales would be 50 000 units. Finally, the VC’s did not accept the valuation
based on 10 times the cash flow and it’s proposed to value the company based on
the sector multiplier on EBITDA being 7,5. The founders want at any price keep
their initial salary requests.
The business plan (see p. 216) had to be completely revised. Founders lost
confidence from both VC’s and they withdraw their proposal.
It was hard to find another interested fund. Thanks to the professor corporate
finance, a new small fund – the venture bastards– made the following offer to cover
the financial needs:
- 50% as equity with a desired return of 25%
- 50% as mezzanine with a 12% i-rate, payback after 5 years
But the founders got in contact with another VC-fund – the vultures. They
convinced a bank to finance the stock. The bank accepts to finance an amount
equal to 80% of the stocks with the stocks as collateral (letter of credit) and an
interest rate of 5%; this on top of the overdraft (cash credit) of 10 000. The vultures
would cover the remaining financial needs at a desired return of 15%.
All money is paid upfront.
Good luck!
Prof. R. Aernoudt
PS: questions to clarification can be asked to prof.
Each question cost you one point!
1
Gedownload door Rani De Wilde ()
Model solution: Exam Cases Corporate Finance – Prof. R. Aernoudt - 23/05/2019
Case NV Watchyou
Name : Aernoudt First Name Rudy N°1
Read page 215 to 219. Only write on foreseen space. Rest will NOT be read!!
What happened to Watchyou. Due to the due diligence, the turnover was
considered too optimistic. Year 1 was needed to do the investments as foreseen, and
ship the products from China. But sales would only start in year 2, estimated at 10
000 units; year 3, 20 000 units. But once really started, from year 4 onwards, the
estimated sales would be 50 000 units. Finally, the VC’s did not accept the valuation
based on 10 times the cash flow and it’s proposed to value the company based on
the sector multiplier on EBITDA being 7,5. The founders want at any price keep
their initial salary requests.
The business plan (see p. 216) had to be completely revised. Founders lost
confidence from both VC’s and they withdraw their proposal.
It was hard to find another interested fund. Thanks to the professor corporate
finance, a new small fund – the venture bastards– made the following offer to cover
the financial needs:
- 50% as equity with a desired return of 25%
- 50% as mezzanine with a 12% i-rate, payback after 5 years
But the founders got in contact with another VC-fund – the vultures. They
convinced a bank to finance the stock. The bank accepts to finance an amount
equal to 80% of the stocks with the stocks as collateral (letter of credit) and an
interest rate of 5%; this on top of the overdraft (cash credit) of 10 000. The vultures
would cover the remaining financial needs at a desired return of 15%.
All money is paid upfront.
Good luck!
Prof. R. Aernoudt
PS: questions to clarification can be asked to prof.
Each question cost you one point!
1
Gedownload door Rani De Wilde ()
