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Warning: Rating: 18+ All Images Courtesy of Beate Uhse Annual Report
Warning: Rating: 18+ All Images Courtesy of Beate Uhse Annual Report
Rating: 18+
All images courtesy of
Beate Uhse Annual Report
CONFIDENTIAL
Accounting
issues for a
high growth
German sex
Company
Final Project
Financial Statement Analysis
Insead 2004 – Professor Jake Cohen
Nagendra Bommadevara; Keisuke
Kirimoto; Pascal Rodel; Rolfe Swinton;
Bas Becks
.
CONFIDENTIAL
Beate Uhse: German Financial Acquisition of
The Company International Ratios Penthouse
GAAP
Founder
arrested for
distributing
pamphlet
about
condoms and First sex- Beate Uhse
sex (2000 shop in acquires
world
Beate Uhse two Euro
counts of Germany
indecency) opened Goes Public internet
legalises
25 Stores pornography May 27 companies
.
1946 1947 1952 1956 1962 1966 1971 1975 1990 1999 2000 2001 2002
“Become the Universal Provider of Erotica and Sex Products for the Whole World”
Mail Order and Retail Expand retail reach through new store concepts that
Grow Core expand reach to women and couples
Make erotica and sex products
B2C mainstream through more Reinforce design & manufacturing competencies
Business accessible channels Leverage capabilities through B2B opportunities
Mail-order logistics capabilities are core to all growth –
enables rapid, cost-effective expansion and ID of
customers for new stores
Geographic:
Expand – Europe
Leverage content across markets and across platforms
International Accelerate international business growth through
– North America
acquisition of well-known brands
Through – Asia?
Invest a little, try a little conservative expansion
Acquisition 0Markets: approach to not over extend
& Organic – Magazine / DVD / Phone Continue to expand international sales (now almost
Growth – Retail / Mail-order 50%) to hedge economic risk
– On-line
50 Whole- Mail
Retail
9% sale Order
0 On
-
1999 2000 2001 2002 lin
Growth e
Beate Uhse is focusing on core growth businesses and is placing careful bets on high
growth opportunities. Synergy opportunities by using content in multiple platforms
Financial Statement Analysis – INSEAD 2004 7
Beate Uhse: German Financial Acquisition of
The Company International Ratios Penthouse
GAAP
Depreciation
Tax driven, not based on useful life Independent from tax accounting
Amortization
Marketable Carried at lower of acquisition cost Classified into trading, av. for sale or
Securities and market value held for maturity
Employee Stock
Discounts recorded as expenses Discounts recorded as direct
Purchase
reduction in paid/in capital
Financial Statement Analysis – INSEAD 2004 10
Balance Sheet Changes
S&P
Beate Uhse
Playboy
Penthouse
ASSETS AND
Number of shares 900 100 LIABILITIES 1,000
@ MARKET
VALUE
Financial Statement Analysis – INSEAD 2004 20
M&A example - Stock
Purchase price of Target 300
= Goodwill 209
= Goodwill 209
= Goodwill 114
Common
Common
Common Shares
Shares
Shares Outstanding
Outstanding
Outstanding 47,324
47,324
47,324 184,690
184,690
184,690 (184,690)
(184,690)
(184,690) 52,453
52,453
52,453
New
New
New Shares
Shares
Shares 5,130
5,130
5,130
CommonShares
Common
Common SharesOutstanding
Shares Outstanding
Outstanding 47,324
47,324 184,690
184,690 (184,690)
(184,690)
(184,690) 47,324
47,324
47,324
NewShares
New
New Shares
Shares
Net
Net
Net Income
Income
Income Aquirer
Aquirer
Aquirer 10.8
10.8
10.8 11.9
11.9
11.9 13.1
13.1
13.1 10.8
10.8
10.8 11.9
11.9
11.9 13.1
13.1
13.1
+++ Net
Net
Net Income
Income
Income Target
Target
Target 1.1
1.1
1.1 1.2
1.2
1.2 1.1
1.1
1.1 1.2
1.2
1.2
+++ Synergies
Synergies
Synergies 4.6
4.6
4.6 7.0
7.0
7.0 4.6
4.6
4.6 7.0
7.0
7.0
--- Taxes
Taxes
Taxes onon
on Synergies
Synergies
Synergies (1.6)
(1.6)
(1.6) (2.4)
(2.4)
(2.4) (1.6)
(1.6)
(1.6) (2.4)
(2.4)
(2.4)
--- Goodwill
Goodwill
Goodwill Amortization
Amortization
Amortization (7.6)
(7.6)
(7.6) (7.6)
(7.6)
(7.6) (7.6)
(7.6)
(7.6) (7.6)
(7.6)
(7.6)
--- Interest
Interest
Interest Expense
Expense
Expense onon
on new
new
new debt
debt
debt (0.1)
(0.1)
(0.1) (0.1)
(0.1)
(0.1) (3.9)
(3.9)
(3.9) (3.9)
(3.9)
(3.9)
+++ Taxes
Taxes
Taxes on
on
on Interest
Interest
Interest Expense
Expense
Expense 0.0
0.0
0.0 0.0
0.0
0.0 1.4
1.4
1.4 1.4
1.4
1.4
=== Total
Total
Total New
New
New Income
Income
Income 8.3
8.3
8.3 11.1
11.1
11.1 5.9
5.9
5.9 8.7
8.7
8.7
Nr ofofof
Nr
Nr Newco
Newco
Newco Shares
Shares
Shares 000)
('000)
('('000) 47,324
47,324
47,324 52,453
52,453
52,453 52,453
52,453
52,453 47,324
47,324
47,324 47,324
47,324
47,324 47,324
47,324
47,324
=== EPS
EPS
EPS Newco
Newco
Newco 0.23
0.23
0.23 0.16
0.16
0.16 0.21
0.21
0.21 0.23
0.23
0.23 0.12
0.12
0.12 0.18
0.18
0.18
ReturnReturn
Returnon on Assets
onAssets
Assets 6%
6% 3%
3% 4%
4% 6%
6% 2%
2% 3%
3%
ReturnReturn
Returnon on Invested
onInvested
Invested Capital
Capital
Capital 12%
12% 5%
5% 7%
7% 12%
12% 4%
4% 5%
5%
ReturnReturn
Returnon on Equity
onEquity
Equity 18%
18% 7%
7% 9%
9% 18%
18% 10%
10% 14%
14%
Leverage
verage
everage
CurrentCurrent
Current Ratio Ratio
Ratio 1.19
1.19 0.74
0.74 1.19
1.19 0.74
0.74
Acid AcidRatio
AcidTest
Test Test Ratio
Ratio 0.48
0.48 0.30
0.30 0.48
0.48 0.30
0.30
DebttoDebt
Debt to Equity
toEquity
Equity RatioRatio
Ratio 1.80
1.80 0.81
0.81 1.80
1.80 2.69
2.69
Leverage
Leverage
Leverage 2.71
2.71 2.42
2.42 2.71
2.71 4.93
4.93
Debt Debt
Ratio Ratio
DebtRatio 33%
33% 34%
34% 33%
33% 55%
55%
+ Synergies
- Taxes on Synergies
- Goodwill Amortization
Nr of Newco Shares
= EPS Newco