Superior Industries International

17 Pages Posted: 21 Oct 2008

See all articles by Robert M. Conroy

Robert M. Conroy

University of Virginia - Darden School of Business

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Abstract

An analyst is about to make a presentation on the potential of Superior Industries International as an acquisition target. The issue for students is whether the synergies are enough to justify a 20% premium over the current price. A secondary objective of the case is to introduce the residual cash flow approach and to relate it to the weighted-average cost of capital (WACC) approach.

Excerpt

UVA-F-0955

SUPERIOR INDUSTRIES INTERNATIONAL

Teresa Blackman, a recent MBA, worked in the Corporate Finance Department of a large commercial bank. She had been in the department only six months and had spent the last month, May 1989, preparing an analysis of a potential acquisition. The report on it would be her first presentation, and she felt herself to be under greater than usual pressure to make sure all the loose ends were tied up. At present, her concerns were in two areas: the interpretation of her results and a technical valuation issue.

Background

Blackman had been assigned the job of finding a suitable acquisition candidate in the original equipment manufacturer (OEM) automobile supplier industry which could help a large diversified company expand into this industry. An important part of her job was to determine whether it was underpriced in the market. Since 1982 the OEM automotive supply industry had been undergoing a consolidation process. A variety of factors such as market base, plant proximity to auto manufacturers, quality ratings, access to Japanese business, technology, and low cost base were essential for success in this highly competitive industry. Low cost production was a necessity since the major auto manufacturers negotiated stringent cost reduction formulas into contracts. As a result, industry margins had been reduced and the weaker players were exiting the market. Only the low-cost producers with the high-quality ratings were able to survive. After an analysis of the OEM automotive supplier industry, Blackman targeted Superior Industries International as an ideal acquisition candidate.

Superior Industries

. . .

Keywords: acquisitions, cost of capital, diverse protagonist, female, diversity

Suggested Citation

Conroy, Robert M., Superior Industries International. Darden Case No. UVA-F-0955, Available at SSRN: https://ssrn.com/abstract=1278852

Robert M. Conroy (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/conroy.htm

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