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c07_Mini Case_Valuation.docx
c07_Mini Case_Valuation.docx

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University of Toronto Scarborough

Mini Case ValuationFrom his corner desk Thomas has a good view of the entire floor a perk reserved until a couple of years ago only to senior managers Freelancercom the firm Thomas works for believes that a flat organizational system stripped of the multiple layers of management characteristic of brick and stone firms is more productive and lets the employees be more involved in the decisionmaking process And while Thomas appreciates being able to see the CEO drink his coffee in the morning with the task on hand he feels that he should hide somewhere for a day or two and just crunch numbers Freelancercom is preparing an acquisition and Thomas as a business graduate among many engineers has been required to independently value the share of the target firm Xlance The CEO in negotiations currently with the investment bank and the target firm prefers to have this inhouse independent valuation as an initial anchor Freelancercom is a major player in the world of online IT outsourcing with more than 29 million projects posted on its site The projects initially focused on website design graphic design copywriting and SEO now also include astrophysics biotechnology industrial design and aerospace engineering The target Xlance is a startup that grew to have more than a half million users positioning its site in the top ten largest freelance marketplaces in the world The acquisition would allow Freelancercom to expand into new markets and increase its global footprint The investment bank analysts expect Xlance to increase its sales by 6 percent in the long run Thomas has estimated Xlance sales at about 62 million in 2013 Xlances EBIT is 15 of sales changes in net working capital requirements are 10 of any change in sales and capital expendit
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