Acquisition of Fortis Techno

8/8/2019 Acquisition of Fortis Techno

1/19

Re-structuring plan

TEAM-- EURYDICE


2/19

About FRS..

Fusion retail solution Pvt Ltd is a joint stock co.

It is started before 5 years

It provides retail solution software with RFIDtechnoly

Initially co. had achieved high growth

Last year due to recession co. incurred hugelosses


3/19

Why to get Acquired

Due to economic recession the software

industries has worstly effected. Our company

has tried to face the economic challenge by

reducing the operating cost and laying -off the

employees but the results are not up to the

mark so our strategy is to get acquired by

some other company


4/19

WhyWipro.

Wipro is fairly diversified company with itspresence in information technology, customercare,lighting,engineering and health care

businesses. It has grown at healthy rate over the last

decade. Though wipro has reasonable

presence in the software segment acquiringfirms like FRS would give wipro the followingadvantages.


5/19

WhyWIPRO will acquire FRS..

It will help wipro kill competition in RETAIL

software segment to great extent.

It will give wipro strategic benefit becausewipro is already there in retail software sector.

It will bring economies of scale for wipro.

Wipro can use its surplus funds by acquiringFRS.


6/19

DO THE RIGHT DEAL

Clear strategy

A post Acquisition plan

Valuation of the propose deal Good legal documentation


7/19

Key legal Consideration

Game Plan

Heads of Term Confidentiality

Funding

Share sales and purchases agreement


8/19

Projected Income Statement for the

first yearParticulars Rs in crores

Sales 7

(-) VC (40% of sales) 2.8

Contribution 4.2

(-) Fixed Cost(including int. on debentute

& salaries)

5

Dep (20% of vaue)) .72

Pretax profit(loss) (1.52)

[email protected]% 00

Profit after tax (1.52)


9/19

Projected Balance Sheet as at first year

endLiabilities Rs in crore Assets Rs in crore

Share Capital 4 Fixed Assets :

Reserve& Surplus: Land& Buildings 3.6

Profit after tax

(1.52)

Plant&Machinery

( less dep: .72)

3.28

6%Debentures 6

Creditors 1.4 Current Assets:

cash 2.5

Debtors .5

Preliminary exp. 00

9.88 9.88


10/19

CASH FLOW STATEMENTS

PBT (1.52)add: int 0.36

(1.16)

add:dep 0.72

(0.44)

less: tax 00Cash flow from operation (0.44)

Cash flow from investing 1.4

Cash flow from financing -0.36

net cash flow during the year 0.60

add: opening cash balance 1.90

closing cash balance 2.5


11/19

Balancesheet of wipro as on 31-3-2009

Sources of Funds

Owner's Fund

Equity Share Capital 293

Share Application Money 1.5Reserve and Surplus 12220.5

Loan Funds

Unsecured Loans 5013.9

Total 17528.9

Uses of Funds

Fixed Assets 3179.6

Capital Work in Progress 1311.8

Investments 6884.5

Net Current Assets

Current Assets ,Loans &Advances 13576.1

(less)current Liabilities &Provisions 7423.1

Total 17528.9


12/19

Balance Sheet of Fusion retail solution as on31/03/2009

Sources of Funds 4

Equity Share Capital 6

Reserve& Surplus -1.52

Loan Funds 0

Secured Loans 0

Unsecured Loans 0

Total 8.48

Uses of Funds 0

Fixed Assets 6.88

CapitalW

ork in Progress 0Investments 0

Net Current Assets 3

Current Assets, Loans & Advances

Less: Current Liabilities -1.4

Misc exp 0Total 8.48


13/19

Calculation for

goodwill / capital

reserve:

Total asset taken over 9.88

Less: liabilities taken 7.4

Net assets taken 2.48

Purchase consideration 10

Goodwill 7.52

Assuming purchases consideration is 10cr.


14/19

Balance Sheet of Wipro immediately after

acquisition One year hence

Sources of funds

Owner's fund:

Share Capital 293 293

Share Application Money 1.5 1.5

Reserve & Surplus 12220.5 13432

Loan funds:

Secured loans 213.93 213.93

Unsecured loans 5084.92 5084.92

Total17813.85 19025.35

Uses of fund:

Fixed Assets 4330.12 2556.89

Capital work in progress 1312.2 774.84

Investments 7636.48 11158.57

Net current assets:

Current assets. Loans and advances 12081.88 14081.88Less: current liabilities 7546.83 9546.83

Total 17813.85 19025.35


15/19

Mode of finance:Wipro has got

sufficient amount in its reserve andsurplus to finance the required 10

crores.


16/19

Impact of the decision on the

shareholder:

Maximization of share holders worth

EPS is satisfactory

PE ratio is satisfactory


17/19

Assuming that after acquisition market priceof share FRS share is 15/- per share

EPS = PAT/ No.of share

= 2.8/40L

= 7

PE RATIO = EPS/MPS

= 7/15

= .46


18/19

Projected Income Statement After

Acquition for the first yearParticulars Rs in crores

Sales 12

(-) VC (40% of sales) 4.8

Contribution 7.2

(-) Fixed Cost(including int. on

debentute & salaries)

2

Dep (20% of vaue)) .80

Pretax profit 4.4

[email protected]% 1.6

Profit after tax 2.8


19/19

Projected Balance Sheet as at first year

endLiabilities Rs in crore Assets Rs in crore

Share Capital 4 Fixed Assets :

Reserve& Surplus: Land& Buildings 5.6

Profit after tax 2.8 Plant&Machinery

( less dep: .80)

3.2

6%Debentures 6

Creditors 1.4 Current Assets:

Debtors 1.4

Cash 4

14.2 14.2

Acquisition of Fortis Techno

Documents

Transcript of Acquisition of Fortis Techno