Valuation of Tandberg: An analysis of the acquisition price by Cisco

Katrine Tuchel

Student thesis: Master thesis


The purpose of this thesis is to analyze the assumptions underlying the price offered by the American network technology company Cisco Systems Inc. to acquire all outstanding shares of the Norwegian videoconferencing company Tandberg ASA. The analysis focuses on the strategic and financial rationales, offer premiums and synergies. The basis for the analysis is a stand-alone valuation of Tandberg. The initial offer of NOK 153.5 per share on October 1st 2009 and the final offer of NOK 170.0 per share are assessed. The valuation of Tandberg involves analyzing the company’s strategic position and financial statements, which is the foundation for the future budget and ultimately the valuation of the company. The enterprise discounted cash flow model and the economic profit model are applied in order to estimate the value of Tandberg’s share on the pre-announcement day September 30th 2009. Both models’ results show a price per share of NOK 178.5. The thesis finds that the strategic rationales for the acquisition is the desire of both Cisco and Tandberg to leverage on the other’s strategic capabilities. An analysis of the acquisition process finds that there is a strategic relationship between the companies. The thesis concludes that the companies’ assessment of the risk of failing to succeed is underlying the initial offer price, and that the final offer price is based on the underlying assessment of the Tandberg shareholders. The financial assumptions are analyzed by a sensitivity analysis applied to the cash flow model. The results find that the Tandberg share price is highly sensitive to changes in the cost of capital, growth in the forecast period and operating margin. The thesis therefore concludes that the underlying financial assumptions of the offer price are based on changes in these parameters. As a result of the sensitivities, the thesis further concludes that the assumptions for growth and synergy expectations are based on small changes in these financial parameters. By investigating the Tandberg share price movement in the months before the offer, the thesis finally concludes that there were moderate bid expectations discounted for in the price at the announcement day October 1st 2009.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2010
Number of pages112