Table of Contents
Introduction................................................................................................................................................... 1
Objective .................................................................................................................................................... 1
Background of Goodwin Wealth Management Company ........................................................................ 1
Acquisition Bids .......................................................................................................................................... 2
Analysis & Results ......................................................................................................................................... 4
Cost of Capital ............................................................................................................................................ 4
A. Cost of Debt .................................................................................................................................. 4
B. Cost of Equity ............................................................................................................................... 4
C. Cost of Preferred Stock ................................................................................................................ 5
D. Capital Structure (Weights) .......................................................................................................... 6
E. WACC (Weighted Average Cost of Capital) .................................................................................. 7
Free Cash Flow ........................................................................................................................................... 7
A. EBITDA/Revenue Ratio ................................................................................................................. 7
B. CAPEX/Revenue Ratio .................................................................................................................. 8
C. Free Cash Flow Calculations & Results ......................................................................................... 8
D. Terminal Value and Total Cash Flow ............................................................................................ 9
Goodwin Value.........................................................................................................................................10
A. Net Present Value (NPV) ............................................................................................................10
B. Equity Value................................................................................................................................10
C. Share Price ..................................................................................................................................10
Calculations & Results Summary .............................................................................................................11
Recommendations & Conclusion................................................................................................................12
Summary......................................................................................................................................................14
References ...................................................................................................................................................14
ii
, Introduction
Objective
The objective of this report is to determine the equity value of Goodwin’s company and compute
its current share price to decide on the acquisition proposal made by the three bidders. A discounted
free cash flow (FCF) analysis will be conducted before arriving at the net present value (NPV) for
future cash flow of Goodwin’s company. The decision whether to accept any of the received bids
to acquire Goodwin’s company depends on their offers with respect to the calculated (NPV) share
price and company’s best interests. If the offer made was higher/lower than the company’s share
price and does not satisfy the company’s interest, the acquisition would be inadvisable. However,
should the bidder comply with the company’s best interests and negotiate a bid closer to the
obtained share price, the acquisition of Goodwin’s company will be recommended.
Background of Goodwin Wealth Management Company
Goodwin Wealth Management Company was originally known as Toronto Capital Investment
Company Ltd. and founded by George Goodwin 35 years ago. Goodwin was a Canadian-owned
wealth management firm that offered capital markets and advisory services for several institutions,
corporates, and clients [1].
In 2007, many firms have communicated their interests in acquiring Goodwin Wealth Management
Company. Consequently, Blake Goodwin hired a consultant that can provide an objective
assessment of Goodwin current value to decide if an acquisition bid shall be accepted or not.
Currently, the share price of Goodwin’s company is at a record high of 22.01$ with 115 million
common shares outstanding. The current high valuation of Goodwin’s share is advantageous
should Blake gives the green light for acquisition of Goodwin Company to occur and accept a
1
Introduction................................................................................................................................................... 1
Objective .................................................................................................................................................... 1
Background of Goodwin Wealth Management Company ........................................................................ 1
Acquisition Bids .......................................................................................................................................... 2
Analysis & Results ......................................................................................................................................... 4
Cost of Capital ............................................................................................................................................ 4
A. Cost of Debt .................................................................................................................................. 4
B. Cost of Equity ............................................................................................................................... 4
C. Cost of Preferred Stock ................................................................................................................ 5
D. Capital Structure (Weights) .......................................................................................................... 6
E. WACC (Weighted Average Cost of Capital) .................................................................................. 7
Free Cash Flow ........................................................................................................................................... 7
A. EBITDA/Revenue Ratio ................................................................................................................. 7
B. CAPEX/Revenue Ratio .................................................................................................................. 8
C. Free Cash Flow Calculations & Results ......................................................................................... 8
D. Terminal Value and Total Cash Flow ............................................................................................ 9
Goodwin Value.........................................................................................................................................10
A. Net Present Value (NPV) ............................................................................................................10
B. Equity Value................................................................................................................................10
C. Share Price ..................................................................................................................................10
Calculations & Results Summary .............................................................................................................11
Recommendations & Conclusion................................................................................................................12
Summary......................................................................................................................................................14
References ...................................................................................................................................................14
ii
, Introduction
Objective
The objective of this report is to determine the equity value of Goodwin’s company and compute
its current share price to decide on the acquisition proposal made by the three bidders. A discounted
free cash flow (FCF) analysis will be conducted before arriving at the net present value (NPV) for
future cash flow of Goodwin’s company. The decision whether to accept any of the received bids
to acquire Goodwin’s company depends on their offers with respect to the calculated (NPV) share
price and company’s best interests. If the offer made was higher/lower than the company’s share
price and does not satisfy the company’s interest, the acquisition would be inadvisable. However,
should the bidder comply with the company’s best interests and negotiate a bid closer to the
obtained share price, the acquisition of Goodwin’s company will be recommended.
Background of Goodwin Wealth Management Company
Goodwin Wealth Management Company was originally known as Toronto Capital Investment
Company Ltd. and founded by George Goodwin 35 years ago. Goodwin was a Canadian-owned
wealth management firm that offered capital markets and advisory services for several institutions,
corporates, and clients [1].
In 2007, many firms have communicated their interests in acquiring Goodwin Wealth Management
Company. Consequently, Blake Goodwin hired a consultant that can provide an objective
assessment of Goodwin current value to decide if an acquisition bid shall be accepted or not.
Currently, the share price of Goodwin’s company is at a record high of 22.01$ with 115 million
common shares outstanding. The current high valuation of Goodwin’s share is advantageous
should Blake gives the green light for acquisition of Goodwin Company to occur and accept a
1
