A “Compelling and Pre-emptive Offer for the Valspar Corporation
(5 pages of text)
Case (Pub Mat)
In May 2015, the chief executive officer (CEO) of the Valspar Corporation (Valspar) contacted the CEO of an industry competitor to discuss a potential strategic combination of the two companies. As discussions continued, Valspar’s board and senior management realized that an alternative strategic collaboration might be more beneficial, so Valspar then contacted the CEO of the second-largest comparable firm in the industry, Sherwin-Williams, which had previously expressed an interest in a business combination with Valspar. Valspar was awaiting a “compelling and pre-emptive” offer from Sherwin-Williams on an “accelerated timetable.” However, several questions remained. What maximum price could be justified in a bidding contest? What was the probability that antitrust regulators would eventually block the deal, resulting in a waste of time and resources to structure a deal that would later collapse? Could the negotiating teams for Valspar and Sherwin-Williams structure the merger agreement to allow for a potential consent decree?
This case is suitable for core corporate finance courses at the MBA level to illustrate firm valuation methods and adding value through mergers and acquisitions. The case is also suitable for courses in valuation, advanced corporate finance, and financial modelling at the MBA or undergraduate level. After completion of this case, students will be able to do the following:
- Determine how to value an acquisition candidate by incorporating any proposed synergies.
- Discuss how to assess a deal from the perspective of antitrust regulators.
- Outline the role of mergers and acquisitions advisors in the negotiating process and the use of fairness opinions.
United States, Large, 2016
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