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Abstract(s)
This case study provides analysis of a hypothetical M&A deal in the automotive industry. The main purpose is to consider if there is potential value creation when merging two different players, with different market approaches.
The existing level of globalization that illustrates the majority of the markets has shaped the automotive industry into determined, multinational groups of companies. The rationale motivating this work lies in the fact that the merger of two different players in the automobile industry would create new opportunities to both companies: BMW Group would acquire an option to expand in an emerging market and Tesla Motors, a small company, operating in the “niche” and, at the same time, “emerging” market of electric vehicles, would be granted an access to a mass production structure.
This paper concentrates on estimating the value created in this deal by combining an insightful business and company examination with Equity evaluation methodologies. Furthermore, it is employed and reviewed, the Literature on both, valuation and M&A, providing the standalone and merged companies’ valuation. Finally, an optimal price is suggested as well as the financing structure and mode of acquisition.
Key findings yielded primarily two conclusions: the piece of evidence that, by the end of 2012, both BMW Group and Tesla Motors stock is found to be undervalued by the market and synergies are approximately €2,65B, resulting in a premium of 93% over the average Tesla Motors’ market cap.