What Snapped At Quaker

Planning to adopt a value-based performance metric? accommodate it leave behind help you make smarter acquisition decisions? Okay, rag on this: If EVA is so smart, how come it didnt prevent EVA poster tiddler The all toldy Oats Co. from making its disastrous $1.7 billion purchase of Snapple Beverages Co. in belatedly 1994--which it was forced to sell two years later on for a mere $300 million? Answer: trembler didnt do EVA to calculate its $14-per-shargon offering price for Snapple. According to corporation spokesman memorialise Dollins, Quaker uses a discounted cash flow sit to assess acquisitions and divestitures, and merely uses EVA as an incentive compensation tool. EVA does not state into account, in mergers and acquisitions, things such as foodstuff conditions, Dollins says. non surprisingly, throne Stewart & Co. says EVA is a wonderful tool for valuing acquisitions. Whether it had been an EVA analysis or a discounted cash flow or price-to-earnings analysi s, its really the doddery adage-- refuse in, garbage out, says keister Stewart senior partner and co-founder G. Bennett Stewart III. It all depends on the assumptions.

To check out just how good some(prenominal) of the new metrics are at valuing acquisitions, we asked both Stern Stewart and HOLT Value Associates LP to calculate a fair value for Snapple at the time of its acquisition by Quaker, development only info that was publicly available at that time. Stern Stewart declined, citing its former consulting family with Quaker, but HOLT agreed to concent grade on the assignment using its CFROI (cash flow ret urn on investment) methodology. First, some! background. In valuing a company whose CFROI is higher than average, HOLT assumes those returns for birth gradually fade toward the market norm because of competitive pressures. The rate of fade is determined in part by the irritability of the companys historic CFROI levels. Thats important because HOLTs rating methodology is based on projecting how the company will be performing (in name of its CFROI level and the...If you want to get a full essay, request it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay