En LBO af Mols Linien

Nils Lukas Jensen

Student thesis: Master thesis


This thesis is a study of the acquisition of Mols-Linien advised by Polaris Private Equity. The objective of this thesis is twofold. Firstly, a valuation of Mols-Linien om the date of the acquisition by Polaris, and secondly an analysis of the possible value creation during their holding period. The key target of this thesis is to estimate the fair Enterprise Value as of 23. September 2015, though a DCF-analysis using the weighted averaged and free cash flows of the firm. This results in different enterprise values concluded by the sensitityanalysis. With Mols-Liniens strategic position and volatile historic performance as entry, the expected cash flows were forecasted, giving a fair Enterprise value of 1.621 mio. DKK. This corresponds to a fair offer price of approximately 59 DKK per share at the acquisition date. The acquisition granted Polaris a 79,8% equity share for 421 mio. DKK financed through debt and equity. Assuming an exit for Polaris, at the estimated fair value multiple, the IRR from Polaris perspective, is derived to be 27%, which is in the upper end of expected returns in the private equity industry. The second part of the thesis analyzed how Polaris can be able to create value during their holding period of Mols-Linien, which in based upon several IRR calculations spanding a holding period from four to six years. First, the analysis concluded that Mols-Linien was a good LBO target based on empirical theory. Secondly, the calculated IRR for the acquistition of Mols-Linien resulted in 27%, respresented financial and EBITDA value generation, 15,42% and 11,97% respectively. This EBITDA-growth is driven by the growth in revenue, this is mainly done through organic growth, whereas the strategic analysis concluded the probability for an acquisition by Mols-Linien being very low, but the possibility for expanding their fleet to four ships was found a possible scenario. This LBO case is based upon the Private Equity fund being an active stakeholder and implement their best practice. Furthermore, the debt in Mols-Linien will be repaid during the holding period, thus being at a slightly higher level compared to entry, this is due to the additional debt from expanding their fleet. The value generation sensitivity showed that Mols-Linien was a good acquisition for Polaris in the base case, but upon variation in either the debt levels, multiple equity growth, the volatility in the corresponding IRR values increased, making it a poor investment decision, even at EBITDA being 90% of actual EBITDA.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2016
Number of pages130