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    Du Pont Case

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    Shubhangi Jain
    The document presents a stand-alone discounted cash flow model for DuPont Corporation's DPC division, projecting sales growth, EBITDA margins, capital expenditures, and other metrics from 2011 to 2016. It evaluates the business at different leverage levels and EBITDA multiples to determine how value is distributed between equity investors and lenders under different scenarios. The private equity firm uses the model to determine the implied enterprise value and maximum acquisition price that meets their 20% target return.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Du Pont Case

    Uploaded by

    Shubhangi Jain
    9 views13 pages
    The document presents a stand-alone discounted cash flow model for DuPont Corporation's DPC division, projecting sales growth, EBITDA margins, capital expenditures, and other metrics from 2011 to 2016. It evaluates the business at different leverage levels and EBITDA multiples to determine how value is distributed between equity investors and lenders under different scenarios. The private equity firm uses the model to determine the implied enterprise value and maximum acquisition price that meets their 20% target return.

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    DU PONT CASE (1)

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    The document presents a stand-alone discounted cash flow model for DuPont Corporation's DPC division, projecting sales growth, EBITDA margins, capital expenditures, and other metrics from 2011 to 2016. It evaluates the business at different leverage levels and EBITDA multiples to determine how value is distributed between equity investors and lenders under different scenarios. The private equity firm uses the model to determine the implied enterprise value and maximum acquisition price that meets their 20% target return.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    9 views13 pages

    Du Pont Case

    Uploaded by

    Shubhangi Jain
    The document presents a stand-alone discounted cash flow model for DuPont Corporation's DPC division, projecting sales growth, EBITDA margins, capital expenditures, and other metrics from 2011 to 2016. It evaluates the business at different leverage levels and EBITDA multiples to determine how value is distributed between equity investors and lenders under different scenarios. The private equity firm uses the model to determine the implied enterprise value and maximum acquisition price that meets their 20% target return.

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    © All Rights Reserved
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    DuPont Corporation - DPC Division

    Stand-Alone Model with EBITDA Growth

    Projected
    Metric
    2011A Closing 2012E 2013E 2014E
    Sales Growth (%) 12.50% 5.00% 5.00% 5.00%
    Depreciation and Amortization 104 115.0 118.0 122.0
    EBIT Margin (Pretax) 6.30% 12.00% 12.00% 12.00%
    Tax Rate1 25% 25% 25% 25%
    Capital Expenditures 80 115.0 122.0 132.0
    Net Working Capital (%) 15.00% 15.00% 15.00%
    Terminal EBITDA Multiple (×) 2
    Debt/EBITDA 2012 (×) N/A
    Debt 6%
    Blended Interest Rate on Debt 6.75%
    Unlevered Cost of Equity 3 11.20%

    EBIT
    Depreciation and Amortization
    EBITDA
    Net working capital
    Increase in NWC
    Capital Expenditures

    APV Analysis
    2011A Closing 2012E 2013E 2014E
    Net Sales 4,281.0
    EBITDA 372.0
    Depreciation and Amortization 104.0
    Pretax Operating Income (EBIT) 268.0
    Interest Expense
    Earnings before Taxes
    Taxes 25%
    Net Income
    Increase in Net Working Capital
    Capital Expenditures
    Residual (Levered) Cash Flow
    Unlevered Free Cash Flow
    Terminal Value
    Unlevered FCF, including TV
    Enterprise Value (EV) 0
    Interest Tax Shield -
    PV Tax Shield -
    EV with Tax Shield 0
    Projected
    2015E 2016E
    5.00% 5.00%
    125.0 130.0
    12.00% 12.00%
    25% 25%
    144.0 150.0
    15.00% 15.00%
    7.00

    2015E 2016E
    DuPont Corporation - DPC Division
    Stand-Alone Model with EBITDA Growth with multiple arbitrage

    Projected
    Metric
    2011A Closing 2012E 2013E 2014E
    Sales Growth (%) 12.50% 5.00% 5.00% 5.00%
    Depreciation and Amortization 104 115.0 118.0 122.0
    EBIT Margin (Pretax) 6.30% 12.00% 12.00% 12.00%
    Tax Rate1 25% 25% 25% 25%
    Capital Expenditures 80 115.0 122.0 132.0
    Net Working Capital (%) 15.00% 15.00% 15.00%
    Terminal EBITDA Multiple (×) 2
    Debt/EBITDA 2012 (×) N/A
    Debt 6%
    Blended Interest Rate on Debt 6.75%
    Unlevered Cost of Equity 3 11.20%

    EBIT
    Depreciation and Amortization
    EBITDA
    Net working capital
    Increase in NWC
    Capital Expenditures

    APV Analysis
    2011A Closing 2012E 2013E 2014E
    Net Sales 4,281.0
    EBITDA 372.0
    Depreciation and Amortization 104.0
    Pretax Operating Income (EBIT) 268.0
    Interest Expense
    Earnings before Taxes
    Taxes 25%
    Net Income
    Increase in Net Working Capital
    Capital Expenditures
    Residual (Levered) Cash Flow
    Unlevered Free Cash Flow
    Terminal Value
    Unlevered FCF, including TV
    Enterprise Value (EV) 0
    Interest Tax Shield -
    PV Tax Shield -
    EV with Tax Shield 0
    Projected
    2015E 2016E
    5.00% 5.00%
    125.0 130.0
    12.00% 12.00%
    25% 25%
    144.0 150.0
    15.00% 15.00%
    7.9

    2015E 2016E
    DPC - DuPont

    Stand-Alone Model with EBITDA Growth, Multiple Arbitrage, and Leverage

    Sales Growth (%) 12.50% 5.00%


    Depreciation and Amortization 104 115
    EBIT Margin (Pretax) 6.30% 12.00%
    Tax Rate1 25% 25%
    Capital Expenditures 80 115
    Net Working Capital (%) 15.00%
    Terminal EBITDA Multiple (×) 2
    Debt/EBITDA 2012 (×) N/A
    Debt 6 3926 3753
    Blended Interest Rate on Debt 6.75%
    Unlevered Cost of Equity 3 11.20%

    EBIT
    Depreciation and Amortization
    EBITDA
    Net working capital
    Increase in NWC
    Capital Expenditures

    APV Analysis
    2011A Closing 2012E
    Net Sales 4,281
    EBITDA 372
    Depreciation and Amortization 104
    Pretax Operating Income (EBIT) 268
    Interest Expense
    Earnings before Taxes
    Taxes 25%
    Net Income
    Increase in Net Working Capital
    Capital Expenditures
    Residual (Levered) Cash Flow
    Unlevered Free Cash Flow
    Terminal Value
    Unlevered FCF, including TV
    Enterprise Value (EV)
    Interest Tax Shield
    PV Tax Shield at kd (6.75%)
    EV with Tax Shield
    5.00% 5.00% 5.00% 5.00%
    118 122 125 130
    12.00% 12.00% 12.00% 12.00%
    25% 25% 25% 25%
    122 132 144 150
    15.00% 15.00% 15.00% 15.00%
    7.9

    3556 3335 3092 2816

    2013E 2014E 2015E 2016E


    Risk of Leverage: Who loses? Equity investors or lenders?

    Downsides of leverage if DPC exit occurs at 5.25× EBITDA (versus 7.9× EBITDA)

    EBITDA growth and multiple reduction

    EBITDA multiple 5.25

    Closing 2012E 2013E 2014E 2015E


    EBITDA - - - -
    FCF (Equal to RCF - Unleverd) - - - -
    Equity TV (Enterprise value) - - - -
    Total - - - -

    LBO equity contribution 0


    Total cash flow to equity 0 - - - -
    Realised IRR Err:523

    EBITDA growth and leverage with multiple reduction

    EBITDA multiple 5.25

    Debt repayment 2012E 2013E 2014E 2015E


    Opening bal
    Repayment
    Closing balance

    Terminal value (Enterprise value after growth phase)


    Debt balance
    Equity terminal value - - - -

    LBO equity contribution


    Total cash flow to equity - - - -
    Realised IRR
    2016E
    -
    -
    -
    -

    2016E

    0
    0
    0

    -
    PE Firm’s Valuation of DPC

    EBITDA Growth and Multiple Arbitrage

    Target rate 20%

    2012E 2013E 2014E 2015E 2016E


    Residual cash flow to equity - - - - -
    Terminal value 0 0 0 0 -
    FCCE - - - - -

    Maximum LBO equity -


    Add: Net debt -
    Implied Enterprise Value -
    PE Firm’s Valuation of DPC

    EBITDA Growth, Multiple Arbitrage and Leverage

    Target rate 20%

    Debt repayment 2012E 2013E 2014E 2015E 2016E


    Opening bal
    Repayment
    Closing balance

    Terminal value (Enterprise value after growth phase) 0


    Debt balance 0
    Equity terminal value - - - - 0

    Maximum LBO equity contribution (PV of equity terminal value) 0


    Add: Net debt (No excess cash) 0
    Implied Enterprise Value 0

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