The assignment of this thesis is to conduct a valuation of the acquisition done by DSV A/S to purchase UTi Worldwide Inc., based on a strategic- and financial analysis where synergies has been taken into account, which will determine if the purchase of UTi has brought shareholder value to DSV’s investors. DSV is a Danish worldwide transport- and logistics company, which is located in more than 70 countries around the world with approximately 23.000 employees, and a yearly revenue of 50,9 billion DKK. The acquired Company UTi is also a transport- and logistics company, with its headquarters in the United States. It is locate in about 60 countries with over 21.300 employees, and a yearly revenue of 4,180 billion USD. It is therefore a huge horizontal acquisition done by DSV to purchases UTi, which will increase DSV’s total revenue with over 50% The strategic analysis is based on an internal and external analysis. The External analysis gives a picture of the company’s macro-environmental factors affecting the organization, and the competitiveness of the industry. With the purpose of analyzing the external environment the PESTEL framework is used, and Porters Five Forces is used to analyze the transport- and logistics industry. In order to analyze the internal factors of the organization, the use of strategic capabilities and VRIO is used, which compares organizations resources and competences to competitors through the strategic capabilities, and with the use of VRIO-model, the resources and competences are rated to see, if they are unique in the industry and compared to the competitors. To summarize these key issues from the frameworks, they will be gathered into the SWOT-model, which gives an overview of the strengths, weakness, opportunities and threats that lies ahead. To find the synergies between the two companies in a merge, the value chain of an organization is used, that takes both DSV’s and UTi’s activities into account, and reflects on what can be optimized in the different activities. The strategic analysis concludes UTi has good opportunities in the growth, which lies ahead in the industry, but the rivalry in the marked is a threat for UTi’s earnings. Within the UTi organization it has its strengths by UTi’s economies of scale to a certain point, and its asset-light strategy model, which insures that the company doesn’t tie its capital in operating assets. UTi’s weakness is its outdated operating system, and its lack of capital to replace it, that gives a growing disadvantage for UTI. Synergies that evolves through a merge of the two companies, is an even better economies of scale, that makes it possible to compete with the largest competitors in the marked, and doesn’t get them Jens Marcussen HD (R) Hovedopgave 10 maj 2016 Page 3 of 92 left behind. Integration of the DSV’s operating system, which removes a large weakness for UTi, will decrease costs, and increase the operations productivity. To evaluate UTi’s historical profitability the statement of operations, balance sheets and the statement of equity, will be reformulated in operating activities and financial activities. Ones the reformulation is complete the value drivers can be calculated and analyzed. Return of equity (ROC) is the main figure, which shows a negative decrease during the whole analyzed period from 9,7% in 2011 to -40,9% in 2015. From 2013-2015 ROC is negative, because UTi has a comprehensive net loss. The reason for the decrease in ROC, lies within the return of assets (ROIC) and the financial gearing. Analyzing ROIC determines it is a decrease within operating margin, which is due to an increasing in staff costs and other operating costs, even though revenue has decrease in the same period. Within the working capital you can also determine and increase in trade receivables, which have an impact on assets turnover (AOH), causing together with the impact from operating margin to reflect negative on the ROIC. A ten year budget has been forecasted, based on the strategic- and financial analysis, which concludes how UTi’s future key valuedrivers will evolve, with the synergies that comes with the merge of UTi and DSV. The valuation is based on the DCF and ReIO model, which both uses the weight average cost of capital (WACC), as the future cash flow discount rate. The WACC has been estimated to be 8,50%, and shows what rate investors and lenders require in return. The valuation of UTi estimated by both the DCF and ReIO model valuate a price per. share of 9,87 dollars, based on the forecasted ten year budget. Compared this to DSV’s purchasing price per. share of 7,10 dollars, it can be concluded, that DSV has bought UTi and gained shareholder value for its investor, with the acquisition of UTi Worldwide Inc.
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