Ivey Publishing
Tesla: The SolarCity Acquisition
Product Number:
9B17N011
Publication Date:
07/03/2017
Revised Date:
11/21/2018
Length:
14 pages (4 pages of text)
Product Type:
Case (Pub Mat)
Source:
Ivey
In mid-2016, the chief executive officer of Tesla, a U.S. manufacturer of electric cars, was interested in acquiring SolarCity, a U.S. solar power manufacturer and distributor. Both Tesla and SolarCity operated in young, high-growth industries; however, despite their high growth rates, both companies were also losing money every year. Both companies had similar products and could be a strong strategic fit. The chief executive officer needed to convince Tesla’s shareholders that SolarCity would be a good acquisition target and then determine a fair price to offer.
Learning Objective:
This case is suitable for undergraduate and MBA courses in finance and strategy. After completion of the case, students will be able to
  • analyze the reasoning required when determining the inputs and assumptions in a discounted cash flow analysis;
  • understand the similarities and differences (e.g., synergies, debt and enterprise value, control premium, and other metrics) between valuing a stock for a minority equity ownership and for the strategic acquisition of an entire company;
  • appreciate the strengths and limitations of using precedent transactions and comparable analysis when valuing young companies that may not yet be profitable; and
  • recognize the signs of good and bad corporate governance by analyzing the management and board structures to ensure that there are no conflicts of interests and that the goals of the board, management, and shareholders are aligned.
    Issues:
    Disciplines:
    Finance
    Industries:
    Manufacturing
    Setting:
    United States, Large, 2016
    Intended Audience:
    Undergraduate/MBA
    Price:
    $4.25 CAD / $4.25 USD Printed Copy
    $3.75 CAD / $3.75 USD Permissions
    $3.75 CAD / $3.75 USD Digital Download
    Associated Materials
    Supplements: 7B17N011 (116 KB)
    Translations: Simplified Chinese (16 pages)
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