ShmoopTube

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principles of finance a la shmoop buying a competitor as in how do you buy

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your competitor okay so here's you here's your competitor you'd love to own [world map with lots of sticky notes]

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them run them dominate the world then you know all that good stuff yeah well

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do you use your own cash do you take out debt to buy them do you use your own

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stock or do you just close your eyes and will it to happen well in real life you [man closes eyes and drone appears]

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don't live for more than eight minutes without thinking about your drone

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company Bladerunner you birthed it you breastfed it for a full year and you

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know that'll be a bullet point on your tombstone you grew it from nothing to a [R.I.P. tombstone]

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bee Hema as of today your baby is staring down a billion dollars of

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revenues a hundred million of earnings it's growing revenues at twenty thirty

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percent a year it has sold thus far over a million drones and expects next year

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to sell a lot more the company today has no debt and a hundred mil or so in cash

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and like all CEOs you're paranoid and the grass always looks greener on the [drones fly by large factory]

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other side of the hill so when your competitor nano drone started showing up

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on Walmart shelves in Peoria right next to yours a meaningful number of [two drone brands on shelves]

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customers began choosing it over yours and you got nervous

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both fearful that they'd crush you and greedy that if you controlled both your [businessman starts sweating]

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own company and nano drone well you'd have massive market power huge clout

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when you negotiated everything from retail shelf space and distribution

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deals on the web to clout with parts and battery supply elements and even the

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insurance for you know when hands get D fingered by teens who don't read the [finger gets cut off by drone blades]

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directions you think of nano drone as one of those diamonds in the rough you [drone brand appears out of sand]

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think you don't know their numbers yet but you know from talking to retailers

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that Blade Runner is still your baby is much bigger more revenues more volume

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more margin but together merged you envision a world dominating drone

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manufacturer distributor and you note that nano drone does a bunch of things

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that you can't do mainly that it makes small top-of-the-line quad copters think [drones on a factory production line]

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you know the signature scene from Apocalypse Now [helicopters flying into sunset]

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done and then to know what the helicopters

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dancing over the forest yeah you envision a new kind of Super Bowl with

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an audience of Desa Millions with competitors from all over the world and [drones fly over to football goal]

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the Israeli military sort of the default always winner you think battle bots in

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3d well the bottom line is that you want to buy nano drone you want to own it

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control it like you're that guy from Fifty Shades you've met the CEO you like [man walks towards drone brand holding a whip]

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her you like her team you like her patent portfolio and you note that the

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company has a big distribution presence courtesy of easier to navigate than

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Europe markets in Latin America we'll just piggybacking on the back of [world map]

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nano drones LATAM distribution you think you could make another boatload of [boat with large cargo of money bags]

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profit next year meaning that in bundled deals where the biggest retailer in

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Argentina don't cry for me already takes 10,000 nano drones well why not bundle

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in with that sale 5000 blade runners for the higher-end market well all the

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sudden Blade Runner would have a brand in Latin America whereas today it has

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pretty much nothing so your mind is made up you pitch you outline the story

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the synergies the love you realize how quiet you have to be about this ahead of

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Google or Tesla or Apple or others coming in early and outfitting you the

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board is giving you a green light within certain cost and deal term parameters I

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eat you can't sign anything until you get there by off but you can go have

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real active discussions and now thankful that you took this course from shmoop

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you have to do the acquisition math which is a whole other ball of wax and

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of course a whole other video

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