Strategic Valuation of B&O

Martin Vedel Bolvig & Simon Johannes Harder

Student thesis: Master thesis

Abstract

The general purpose of this thesis is to estimate the share value of B&O on August 15th 2012. The valuation is based upon strategic and financial analyses, where both qualitative and quantitative measures have been used. The strategic analysis of B&O has been constituted by different models selected with regards to the three basic levels of strategic analysis; the macro environmental level, the industry specific level and the company specific level. The macro level was examined through a P.E.S.T. analysis in order to establish an understanding of the relevant aspects in these categories. The industry specific level has been examined through Porter’s Generic Strategies as well as a Porter’s Five Forces, while the company specific level has been examined through a Value Chain Analysis and a McKinsey model while the new sub brand B&O Play was further analyzed through Aakers Strategic Brand Model. Overall, the strategic analysis of B&O and their context indicated a large market potential, as especially the BRIC markets and herein China in particular, is experiencing exceptional growth as well as a preference towards European luxury goods, why B&O through their new partnership with Sparkle Roll and A Capital is positioned effectively in order to get into the market. In the financial statement analysis it was shown that a positive trend had been achieved over the last two accounting periods, why the expectations to the new strategic approach constituted by the Leaner, Faster, Stronger initiative were high. It was also shown that both the B&O Play and the automotive segments have experienced strong growth, why both are being considered growth drivers going forwards. The forecasting scenarios creating the foundation for the subsequent valuation of B&O has been constituted of 5 different scenarios, each with a separate weighting in order to account for the specific nature and the uncertainty and risk pertaining to the different scenarios. The consequent WACC used to value B&O was calculated to 9,66% based on the findings in the previous analysis and the section regarding WACC. The DCF and the EVA valuation methods were both used, each reaching the share value of B&O on August 15th 2012 as 91,35 DKK, subsequently indicating a 17% undervalued B&O market share price on the given date. The subsequent sensitivity analysis has shown that the value estimation can potentially change significantly as a result of changes in underlying WACC, but based on the previous findings, the estimated share value of B&O on August 15th of 91,35 DKK is believed to be representative of B&O’s current situation and true value.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages166