SoftSol's Acquisition of Ivon Inc.

Code : FCF0018

Year :

Industry : Information Technology

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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Abstract: On April 28, 2010, United States of America based information technology company SoftSol Inc. (SS) announced the acquisition of its own country based company Ivon Inc. (Ivon), which was provider of smartphones powered by NetOS operating system at a price of $5.70 a share for $1.2 billion in an all-cash deal. It was a massive move that SS thought would reshape the mobile industry. The deal was supposed to give SS the access to Ivon's inbuilt software that could run phones and other type of devices like computer tablets and at the same time would give SS headway into one of technology's fastest growth segment. SS had realized that funds for the acquisition had to be raised from outside sources. Obtaining external financing was not much of a problem for SS, given that the acquisition of Ivon would add almost $400 million to the earnings before interest and tax (EBIT) in 2010. The company was facing the dilemma as to what was the best source of finance the company should use to finance the acquisition of Ivon. There was conflict of opinions among the members of board of directors of the company for this consideration. Hence this case study provides enough space to debate and discuss on the issues of possible sources of finance and using leverage optimally so that the value of the firm could be maximized.

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Pedagogical Objectives:

  • Understand the various sources of finances available to a firm.
  • Understand the concept of leverage.
  • To understand how the leverage could add to the value of the firm when used optimally and efficiently.
  • To understand as to what is the best source of finance for a company under different circumstances that would maximize its value.

    Keywords : Acquisition; Smartphone; All-cash deal; Merger; Information Technology; Mobility Strategy; Operating System; EBIT; Long Term Debt; Equity; Risk; Dividend

    Contents :
    SS Background
    Details of the Deal

    Case Introduction >>

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