Extra Credit: Palamon Capital Partners (Case 51) Worth up to 10 points (up to 10% extra on total...

Question

Extra Credit: Palamon Capital Partners (Case 51)
Worth up to 10 points (up to 10% extra on total grade)
Write a 1,000 word essay (2 pages plus exhibits) analyzing & valuing the situation. Write your essay to make a recommendation of what the company should do. Clearly state whether or not Palamon should invest in TeamSystem, S.p.A., and if you recommend not investing, what counterproposal you would make. Explain your rationale for this advice, and be aware that “my valuations says it is worth $_____” is not sufficient rationale. Explain what assumptions drive your numbers. Does TeamSystem fit with Palamon’s investment strategy, and how (or how not)? What are the specific risks of this deal? How does the cross-border nature of the deal introduce risk? Based on the risk, explain and defend your choice of a discount rate. How much is 51% of TeamSystem’s common equity worth? Use both a discounted cash flow and a multiple-based valuation to justify your recommendation. Build a valuation model and include your valuation in the exhibits. Include sensitivity and scenario analysis and consider any relevant uncertainties or qualitative factors. Explain what non-price terms are important.
Make sure your essay follows the case essay ru
ic and the advice in Ellet's book, and use the ru
ic (at the end of this document) to critique and revise your work before turning it in.

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Preeta · Accepted Answer

Palamon should invest in TeamSystem, S.p.a. based on the analysis of its financial statement and figures. Certain criteria are to be followed before making investment in a company (Gindl ett al.,). The company is making constant profits and is generating high revenue. In the year 2007, the company generated a revenue of 1,23,131 million lire, which is almost equivalent to other tier 2 companies in the same industry (exhibit 11). There has been constantly profit since 1996 (exhibit 4 & 8) and the company need not had to face any loss. If we consider the current ratio then in 2007, the company has the current assets of 1,52,941 million lire against the current liabilities of only 39,402 million lire (exhibit 5 & 9). So, the current ratio of the company is 3.88, which is a very good ratio. In the year 2006 and 2007 there is almost no long term debt which means the company is running only on owner’s equity (exhibit 5 & 9). So, all these factors prove that the company is in a very sound financial position and has the potential of growing in future. So, it will be worth making the investment in the company. 
	Generally the customers of Palamon comprises of charitable firms, insurance firms, special investment groups and pension funds. So, the company mainly invest in the middle level firms which are less risky of nature. TeamSystem is a information technology firm which is well managed and operated. Currently, the information technology industry is booming due to fat change in technology and demand for technology (Banuls et al.,). So, although this company is different from the other companies where Palamon has made investments and so does not fit with the company’s investment strategy yet low risk is related to this investment and worthy as well.  
	Information technology companies have several inherent risks (Schwalbe) which include hardware and software failure, virus and other malware attack. If such incidents happen ten it can take a toll on the existing customers of the company and so the revenue and the profit of the company can be hugely affected.

Extra Credit: Palamon Capital Partners (Case 51) Worth up to 10 points (up to 10% extra on total grade) Write a 1,000 word essay (2 pages plus exhibits) analyzing & valuing the situation. Write your...

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