Deutsche Bank Securities: Financing the Acquisition of Consolidated Supply S.A

22 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Sean Carr

University of Virginia - Darden School of Business

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Abstract

In November 2003, a vice president of Deutsche Bank Securities received a request from a client to finance the acquisition of a large hospital-supply distributor. The client needed to present to the seller an offering price and indication of financial commitment within two weeks. The contemplated transaction entailed a highly leveraged acquisition of the target. The tasks for the student are to value the target firm and projected synergies, assess the creditworthiness of the target (i.e., the ability to bear the high debt), and critically evaluate the general design of the transaction.

Excerpt

UVA-F-1494

Version 3.2

DEUTSCHE BANK SECURITIES: FINANCING THE ACQUISITION OF CONSOLIDATED SUPPLY S.A.

On November 20, 2003, Maria Ober, vice president of Deutsche Bank Securities, received a telephone call confirming that an important client intended to bid in an auction for a large hospital supply distributor and was seeking Deutsche Bank's assistance in arranging the financing. The call was no surprise: the client had briefed Deutsche Bank on the possibility of a bid regularly over the past six months. The seller had finally announced a firm deadline for receiving sealed bids for the target. An offering price and indication of financial commitment were due in two weeks.

The client was Intercontinental Capital, Ltd. (ICL), a major European leveraged buyout (LBO) sponsor. The target of the acquisition was a leading global supplier of medical products to hospitals and a subsidiary of AtlantisMed Systems, a major manufacturer of medical products and supplies. AtlantisMed was headquartered in the United States. The subsidiary, Consolidated Supply S.A. (CSSA), had global sales of $ 2.5 billion and was headquartered in Luxembourg.

Calling from Luxembourg, Louis Danton, a managing director with ICL, explained to Maria Ober that ICL contemplated a bid of $ 1.513 billion for CSSA, paid in cash—which represented a multiple of 9.2 times 2003 estimated (2003e) EBITDA. Danton also sketched a preliminary financial structure for the bid: ICL would invest $ 534 million in the equity of CSSA. Deutsche Bank would arrange total funded debt of $ 979 million, which would represent 6.0 times CSSA's 2003e EBITDA. ICL also sought a bridge loan facility from Deutsche Bank that would temporarily fund the deal until underwritten notes could be placed with investors after the closing of the acquisition. Ober responded that the leveraged finance team would begin work on the deal immediately and respond in a few days.

. . .

Keywords: leveraged acquisition, valuation, deal design, acquisition financing

Suggested Citation

Bruner, Robert F. and Carr, Sean, Deutsche Bank Securities: Financing the Acquisition of Consolidated Supply S.A. Darden Case No. UVA-F-1494, Available at SSRN: https://ssrn.com/abstract=909924

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Sean Carr

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4812 (Phone)

HOME PAGE: http://www.batteninstitute.org

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