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How to Buy Port Company, Transportation and Logistics?

We know that we are currently experiencing a serious economic crisis in the world, as
there is no memory since the reconstruction of the global economy after the Second
World War.
This is a time when, temporarily, for 2 to 3 years at least, the vast majority of companies
will be deprived of a substantial part of its market and income.
The logistics industry, transport and ports, while supporting the real economy, trade
facilitator and liaison between producers and consumers or intermediate producers, will
not be out of this crisis, is also affected.
With unemployment, or the simple perception of this risk, families moderate
consumption, which decreases the more discretionary items, such as the acquisition
vehicle and appliances, but families will also reduce the purchase of new clothes and
shoes and the rate of exchange furniture or home.
Thus, the construction, car manufacturing, footwear, clothing, import and distribution of
small appliances for consumer and industrial machinery are seriously affected. The
"core" consumer must reside in the core products, the basic food, education and fuel,
though these can be reduced also.
Many companies do not suffer the way this crisis because they are not prepared for
having too much "fat" people, operating costs, investment and debt and, essentially, for
not having long-term prospects and sustainable competitive advantage, a context of
increased competition.
This is a time of opportunity for those who have cash and want to radically change their
position in the market, start counting the future recovery of the global economy in a
dominant position of market leadership or just stay in this time of increased sales of
businesses.
The only alternative may be to acquire equipment, land or buildings to other companies.
May be to hire staff that has the technical expertise or market competitors. Or, you may
acquire companies as a whole, personnel, equipment, facilities and its market, and then
integrate in the group are part of a strategy horizontal or vertical.
As with the purchase of goods individually, there is usually the market value as a
reference to the purchase price, although in this case, and also to the acquisition of the
company as a whole, the purchase price should be measured in negotiating taking into
account the special circumstances of the crisis.
What is important to know who is buying what should be the maximum price they would
be willing to offer in the negotiation for the goods or the company as a whole.
The answer to this question goes hand in analyzing the value of the company for whom
the purchase.
The value of the company for whom the purchase is not related to market prices of each
good in itself, nor the sum of the values of these goods, but worth the goods, people,
customers of the company, its organization and competitive advantages in the future may
bring to the buyer. How to measure these benefits to come? How to guess?
The answer, unfortunately, is that there is no crystal ball to guess and only will be
without its head, with the knowledge they have of the past and your personal power to
foresee market trends, is on the side of customers, whether in the competition.
It is on this vision to be built a model forecast of the future for both scenarios with and
without the acquisition of the company for your group or company.
That staff costs will have in each case, the operating costs, that sales are expected in each
case, finally, the results will be?
Do not forget to count the savings they may have with the fact that together the two
companies into one, its present and you are purchasing, ie the synergies that can benefit,
such as the reduction of administrative costs of the other company since it may use
existing human resources for both companies (in this case is the cost of dismissal and
personnel), logistics merger, sale of land and facilities that they are in duplicate, etc.
The prediction horizon should be one that is more reasonable in terms of degree of
certainty to about 80% probability of occurrence, in his opinion. Five years, 10 years, 15
years. It all depends on what is sure to be able to hit the predictions of the future, depends
on the type of market in which it is inserted, the degree of risk of losing the market and it
disappears.
The aim is to determine the value of cash flow shortfall and the purchase of goods or the
company in question will generate, or how much money you earn from your bank
account in the future, with this acquisition today?
Here's an example in a market outlook up to 5 years, not forgetting to take the value of
depreciation to operating costs, since there is a movement of money cash flow:

Obviously a real analysis, the first 2 to 3 years should certainly have a decrease in sales
or stagnation, given the backdrop of global crisis.
Determined the value of annual cash flow that you know that the acquisition will
generate, will then determine the maximum amount you are willing to offer the company.

Thus, they need to determine the cost of capital.


But the cost of capital is equal to the remuneration that an application without risk
Treasury bonds might provide within 5 years, plus a risk premium, which will attract this
investment, where there is a real risk of losing money power . For this we use the CAPM
- Capital Asset Pricing Model:

Cost of Capital = Rcp = Rf + (Rm-Rf) * β

With:
Rf = Yield of the Treasury bill (OT) for the period (see Economic Journal);
Rm-Rf is the risk premium in the market, calculated by the study of Snow and Pimentel,
2004, amounting to 6.38% for Portugal
Β (Beta) is the degree of risk of the specific market where it operates the company, as
measured by analysis of betas of businesses that are publicly traded. (see for each
company for example http://www.finbolsa.com/raciosb.asp)

Imagine that the OT to 5 years is 4% and the risk premium of the sector is 0.94, so we
will have a capital cost of Rcp = 4% + (6.38%) * 0.94 = 10%
Determined the cost of my capital will be used this rate to update the additional cash
flows that the acquisition of the company can generate by dividing each value of annual
cash flow by (1 + cost of capital) to the high number of difference years between now
and the year in question:

In other words, is now willing to buy the company, so that it will work with your existing
for a period of 5 years, with additional cash flow guaranteed up to 80%, he believes, to a
value of 2, 6 monetary unit, which is the NPV - Net Present Value of my investment.
Obviously, though with a higher risk, the possibility exists that the company can succeed
beyond 5 years, so you can then earn some money beyond the purchase price. To the
extent that he believes the results over 5 years, may or may not provide a little more for
the company:

With these benchmarks for the value of the company, now needs to take away the value
of the debts that the company has at the time of purchase, if you pass.
Finally, it must decide what type of financing the acquisition will be used. So you can
more or less leverage your investment, provided you have an interest rate below its cost
of capital, also benefits from the tax savings thereby made the increasing financial costs.
But this would give another article and would have to use the model of weighted average
cost of capital (WACC) to make the existing cash-flows:

WACC = Tx.juro * Cap.Alheio / Cap.Total * (1-rate IRC) + Cost of Cap * Net Worth /
Cap. Total