Harrington Powerpoint Final V1

Harrington Firm

Harrison Wulsin

Jack O'Neill

David Williams

Will McKiernan

Summary of the business

 Operating Attributes

Market dominant diary company (est.


60-65% business of industry @ $1314mm

Successful past 40 years

Go back on avg. invested capital = > 20%

Loyal customer base � 98% re-orders

Impressive seed money management





Concern at Harrington:

 Mr. Baring's health is weak

 Selling price: Total Value= $10mm

Money = $8mm

 Mr. Brooks and three other senior managers express matter � want to preserve job continuity & foresee chance to turn a profit in firm value

 How can the four managers meet up with Mr. Baring's asking price?

Frosty Call Issue #2

 Is the $3mm advance from your VC's enough to

help funding the $10mm purchase price…

of course, if so , in which do they will get each of the $$$$?

Capital Requirements

Volume Needed

12, 000, 500

Bank Loan

several, 000, 1000

Baring Note

2, 000, 000

Manager's Money

two hundred fifity, 000

Venture Firm

several, 000, 000


1, 750, 000

Capital Requirements

Sum Needed

twelve, 000, 1000

Bank Loan

three or more, 000, 500

Baring Be aware

2, 1000, 000

Manager's Money

250, 000

Enterprise Firm

a few, 000, 000

Cash around the Balance Sheet

you, 750, 000

Baring's Notice

 Covers $2, 1000, 000 of Capital

 5 12 months Note

 $3, 1000, 000 Confront Value paying 4% discount coupons

Cold Contact Question #4

 What would be a fair estimate in the IPO benefit

and how appeared?

Deriving a Correct P/E Proportion

 Looked over a P/E Ratio depending on $10 million sale

 We after that looked at similar companies to verify if

this made sense

Deriving a Correct PRICE TO EARNINGS Ratio

Deriving Correct PRICE TO EARNINGS Ratio

 Clearly very much for administration!!

IPO Valuation

 To be able to see what percentage of our Company we

had to relinquish to meet the VC difficulty rate there were to

think of a Value of NewCo in the point of sale

 We decided that since there were no changes in the

market the same PRICE TO EARNINGS Ratio was appropriate

Frosty Call Query #6

 It seems strange that the Creeks group

relatively omitted any provision to get the

payoff of the debenture in their forecasted

cash flows…a mistake or maybe?

Venture Capital Financing

 However in Exhibit six of the case, this showed that NewCo

repaid no financial debt to the Investment capital company

 Since VC company could earn 21% on a fairly safe

gamble, we thought that Creeks was in the driving street and

can negotiate conditions as he observed fit

 Therefore this individual could wait until after 1976 and

incrementally pay off this debt through cash flows of


Venture Capital Money

NewCo "balance sheet"

Cold Contact Question #8

 Just how best to evaluate the " unexploited business

opportunity” that the Creeks group wants to


Unexploited Business


 Capex: Season 1 - $100, 000, Year 2 and a few - $225, 000

 Year 1 Sales: $250, 000

 Growth: 12 months 2 through 4 – 40%, Yr 5 through 10 – 13. five per cent  Profit Margin: 6% of Sales

 Taxation: Used Funds Forecast pertaining to 1971-1976, then grew for

constant 1976 growth thereafter

Summary of Deal to get Management

 Is this seventy five. 7% come back enough?

 Very Risky:

Owners are the previous to get their money back thus if they

don't meet their revenue forecast they may be in trouble

The owners have drawn into their financial savings, refinanced

their very own mortgages, and liquidated other investments in

so that it will get this $250, 000

Ultimate decision

 YES the owners should acknowledge this deal

 Demand for the product is definitely predictable and barriers to

entry are very high

 The deal ensures that they will have got control over the

company as well as its sale

 They may have liquidated different investments but it

would be hard to look for one that provides a 75% returning on




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