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Accu Flow

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Executive Summary:
This report aims to identify the most probable outcome of Accuflow Inc.’s management buyout deal with respect to three parties, Accuflow management, Venture capitalist (Greylock and NorWest), and HPC.
The report will seek to identify Accuflow enterprise value from the viewpoints of the different parties and with different valuation techniques in order to come to the conclusion.
Initial Scenario:
The report assumes that the initial scenario of the deal is made with the $25 Million mezzanine deal that Accuflow is most likely to be able to obtain, in addition to a senior debt of $108 Million. Further assumptions to the starting scenario are shown in Appendix 1 of the report.
The management projection is used for …show more content…

Given agreement between the two in terms of valuation, it seems likely that Greylock is likely to accept Cunningham’s proposal if the price is above $110 Million.
HPC’s Interest in Accuflow:
HPC’s views on the attractiveness of Accuflow could be explained in an OUTSX-CUPID framework qualitatively.
Opportunity
Competition – Accuflow has long been a market leader in the hydraulic valves market that commanded a premium price for its products. In recent years however, consumer preference have begun to change from buying hydraulic valves from suppliers to buying full hydraulic systems instead. Accuflow has its roots in its “groove casing” technology historically and does not have the same competitive lead in integrating its products into one such system whose demand has recently surfaced. The management team has looked hard into this issue and Accuflow is en route to diversifying its product lines to increase its competitiveness. Given Accuflow’s superior products and brand name, it is difficult to tell whether Accuflow will lose the race in diversification of its products.
Moreover, the sales of hydraulic systems tend to be somewhat sensitive to the capital spending cycle in the manufacturing sector while sales of hydraulic valves are not. Although Accuflow is currently not up to par in terms of integration, the steady sales of its grooved casing hydraulic valves could help Accuflow tide through both good and bad times in the near

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