Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation on

In: Business and Management

Submitted By gt19880917
Words 3043
Pages 13
4194
APRIL 19, 2010

TIMOTHY A. LUEHRMAN
JAMES QUINN

Groupe Ariel S.A.:
Parity Conditions and Cross-Border Valuation
On June 23, 2008, a Monday morning, Arnaud Martin arrived at his office in Groupe Ariel’s corporate headquarters in Mulhouse, France. The previous week, Martin had requested additional financial information about an investment proposal from Ariel-Mexico, a wholly owned subsidiary that operated a manufacturing facility and a regional sales office in Monterrey, Mexico. The information had arrived late Friday—too late for Martin to analyze—and was waiting for him
Monday morning. As a financial analyst for a global manufacturer of printing and imaging equipment, Martin examined many cross-border projects, particularly since Ariel had accelerated its move into emerging markets several years earlier.
The Mexican investment proposal called for the purchase and installation of new automated machinery to recycle and remanufacture toner- and printer cartridges. Cartridge recycling had become an important part of Ariel’s business in many markets and promised continued growth.
Many office product retailers operated formal toner cartridge recycling programs, for both the environmental benefits of keeping materials out of landfills and demonstrated cost savings for their customers. Writing in a leading trade journal, one analyst predicted, “We are going to see more and more refined approaches to recycling and remanufacturing [cartridges] in the coming months and years … Both corporate and individual consumers are becoming habituated to it. They have simply come to expect recycling as an option, even for smaller cartridges at lower price points.”
Ariel-Mexico’s Monterrey plant began its cartridge recycling program in 2005. The plant’s recycling process consisted of a sequence of operations carried out almost entirely by hand, with the
help…...

Similar Documents

Hbr Reflection Retail Doesnt Cross Borders

...Harvard Business Review Reflection Subject matter: HBR Reflection Retail Doesn’t Cross Borders -Here is why and what to do about it- Reflection The article at hand "Retail Doesn't Cross Borders- Here's why and what to do about it" written by Marcel Corstjens, the Unilever Chaired Professor of Marketing at Insead, and Rajiv Lal, the Stanley Roth Sr. Professor of Retailing at Harvard Business School, was published in the Havard Business Review of April 2012 on the pages 104-111 and deals with the issues of expanding abroad for international grocery retailers and the resulting problems they have to face. In the beginning of their article they state that economical recession in the U.S. And Europe lead easily to focussing on feasible emerging markets in the developing world The opinion that globalisation is not a receipt for growth and emerging sales rates. Corstjens and Lal put the focus on grocery retailers and got the result that within a few exceptions the retailers have not gained any growth by expanding abroad. They stress that the lack of a close connection to the retail market abroad and the dominating local players made it difficult for emerging grocery retailers to find a place in the market. Some retailers found new strategies in order to emerge domestically as well. They express many reasons for expanding which varies, but Cortjens and Lal point out that the main goal is growth. By stating that many companies are lead by opportunistic decision......

Words: 1465 - Pages: 6

Cross Border Competitveness

...Crossing borders: MTC’s Journey through Africa 1) What are MTC’s key strengths and weaknesses? Some of MTC’s key strengths are its over 20 years of experience in the cellular business and the resulting strong brand recognition the company enjoys. MTC was the first mobile telecommunications company in the Middle East. The company quickly achieved expansion through the acquisition of several existing telecommunications companies in the region: MTC-Vodafone in Kuwait and Bahrain, Atheer in Iraq, FastLink in Jordan, MTC Touch in Lebanon, Mobitel in Sudan, and Celtel in Africa. The success of the Celtel brand in Africa, for example, “had bred an almost unique degree of loyalty in its customers.” The fact that all these brands became local icons in their own right motivated the company to push for expansion outside the regional arena and into a global market by uniting the group under a single brand. The company introduced “One network,” which was the world’s first borderless mobile phone network, and this specific service gave an edge to the company against its competitors. MTC’s weakness and biggest challenge is the level of competitiveness the company is faced with as it enters new markets. Having to transition from an almost hegemonic position (when everybody else was afraid to enter the African market and the company had a booming market all for itself), to a position where several big telecoms threatened to become industry leaders in the targeted regions. In order......

Words: 3871 - Pages: 16

187 Reasons Mexicans Cant Cross the Border

...187 Reasons Mexican’s Can't Cross the Border contains amazing poetry, narratives and insight from Juan Felipe Herrera. This poem is a mix of humor and truth, and in reading it you can watch the history of the Mexicano unfold before you. It is almost as though Herrera has painted a picture, a picture of love and hate. A piece of art that many socially conscious individuals interested in change and truth willingly accept yet others will walk right past never daring to look too hard. This wall is sometimes disjointed, uncomfortable, and awkward, but that is the life of the Mexican in this world, and that is the beauty of the picture Juan Felipe Herrera lays before his readers. Also like a picture in that you get little snippets of peace and war, of pride and self-consciousness. Each line of the poem gives glimpses, which are somewhat interesting, but in its entirety they become completed and together they form a whole. Reading through this poem, some of these reasons were very capturing, causing me to achieve a new level of understanding, while others were most likely targeting someone else and were above my head. Just as walking through an art exhibit some pieces you cannot tear yourself from, others you barely notice...and understand that each viewer/ reader will take home a completely different experience. Many people can read the same poem or look at the same picture and take drastically different things away from it but that is what gives something its beauty. Herrera......

Words: 470 - Pages: 2

Types of Cross Border Pipelines

...Any cross-border unitization will need to be agreed to at two levels: (1) The impacted states will need to reach an agreement and (2) The respective license holders will need to enter into a unit operating agreement. The purpose of the first agreement is to set out the rights and obligations of each state with respect to the field development and incorporate procedures requiring agreement of both states to minimize conflicts. In a cross border field, the unit operating agreement between the licensees will follow the normal pattern in most respects. However, it will be subject to the provisions of the relevant treaty so that, for example, the selection of the unit operator or a redetermination of tract participants will require the agreement of the respective states. The unit operating agreement it will require the approval of both states in order to ensure that it embodies the requirements of the treaty. The treaty is binding only on the respective states; it does not bind the license holders directly, as they are not parties to it. The joint petroleum development agreement refers to an arrangement between two states to develop and share jointly in agreed proportions the petroleum found within a designated zone of seabed and subsoil of the continental shelf or EEZ, to which both states are entitled under international law. The Joint Development Zone (JDZ) is generally established as a temporary solution for a specified period of time, without prejudice to......

Words: 1253 - Pages: 6

Sony vs. Mitsubishi Cross Border Acquisition Case

...and Sony seem to have coped with this issue successfully by introducing new management systems and practices - redefining the mission and goals of their global R&D, assigning two types of projects at the same time, rather than specializing projects among different labs, coordinating not by large-scale committees or meeting but through human relationships among a small number of top R&D mangers, drastically changing their organizational structures. It appears that both companies have already realized some of the anticipated benefits. Full Text: Copyright Industrial Research Institute, Incorporated Mar/Apr 1999 [Headnote] A long tradition of conducting R&D overseas has helped these Japanese companies adapt to changing competitive conditions. [Headnote] OVERVIEW: As companies transfer their R&D activities abroad, they will have to confront a challenging management issue: how to successfully operate R&D laboratories dispersed around the world. Both Matsushita Electric and Sony seem to have coped with this issue skillfully by introducing new management systems and practices-redefining the mission and goals of their global R&D, assigning two types of projects at the same time, rather than specializing projects among different labs, coordinating not by large-scale committees or meetings but through human relationships among a small number of too R&D managers, drastically changing their organizational structures, and so on. It appears that both companies have already......

Words: 6426 - Pages: 26

Groupe Ariel Sa Case Analysis

...Groupe Ariel S.A: Parity Conditions and Cross-Border Valuation Abstract This case discusses Cross-Border valuation of projects. This kind of analysis is common for companies that are operating in many countries. Groupe Ariel is one such company that is considering investing in a project in its own subsidiary in Mexico. The company manufactures and sells printers, copiers and other document production equipment in many countries. As far as, expansion into new markets is concerned, company is very slow in taking initiatives as compared to its competitors owing to the recent recession. But the management of the company believes that better durability and lower after-sales service costs of their products enable the company to build customer loyalty. The company is now considering replacing the manual equipment used for recycling in Mexico by new equipment that requires less material and labour costs. But, the uncertainty linked with certain macroeconomic factors like exchange rate, inflation and interest rate has made the valuation of the project very complex. Compute the NPV of Ariel-Mexico’s recycling equipment by counting incremental peso cash flows at a peso interest rate. How should this NPV be translated into Euros? Assume expected future inflation for France is 3% per year. For the purpose of calculating NPV in Pesos, incremental cash flows of the project for the next 10 years should be calculated first. The initial outflow of cash flow at time “0” is the cost of......

Words: 1621 - Pages: 7

Groupe Ariel

...Groupo Ariel: A Project Analysis On June 23, 2008, a Monday morning, Francois Belliard arrived at his office in Groupo Ariel’s corporate headquarters in Toulon, France. The prior week, Belliard had requested additional financial information about an investment proposal from Ariel-Mexicana, a wholly-owned subsidiary that operated a manufacturing facility and a regional sales office in Jalisco, Mexico. The information had arrived late Friday, too late for Belliard to analyze due to the weekend. He sat down this morning to examine the proposal, as it was Belliard’s job to evaluate cross-border projects for Ariel, a global manufacturer of printing and imaging equipment. This type of cross-border proposal was not unusual as Ariel was in the process of expanding its global presence beyond Europe. The Mexican investment proposal called for the purchase and installation of new automated machinery to recycle and refurbish toner and printer cartridges for the local market. Recycling and refurbishment had become a large portion of Ariel’s business in all its markets; both European and foreign. This process and market had burgeoning margins and was proving to be a centerpiece of Ariel’s future growth. Many office product retailers operated formal toner cartridge recycling programs, both for environmental reasons of keeping reusable waste from landfills and demonstrating cost savings to customers over continually buying new OEM product. Writing in a leading trade journal, one industry......

Words: 2121 - Pages: 9

Determinants of Cross Border Mergers

...Determinants of cross border mergers and acquisitions A cross-border merger is where the assets and operation of two firms belonging to or registered in two different countries are combined to establish a new legal entity. Cross border merger are important as it is considered as the mode of entry in the foreign market, provides a dynamic learning culture and is an important value creation strategy. Several factors are responsible for fuelling the growth of cross border mergers. Few among them are industry consolidation phenomenon, privatization and liberalization of the economies. The volume of cross border mergers has increased over the period from 23% of total merger volume in 1998 to 45% in 2007. Cross border mergers provide another dimension to domestic mergers because of cultural or geographic differences, government related differences, imperfect integration of the capital markets, changes in exchange rate and stock market valuations in local currency. A parallel literature to that on cross-border mergers concerns FDI. In this paper, we focus our empirical work on mergers and acquisitions rather than all FDI due to data quality. FDI contains components other than investment such as inter-company loans and retained earnings. As per the journal, the merger sample includes deals announced between the period 1998 and 2007. The total sample was of 187,841 mergers covering 48 countries. Out of this, 56,978 were cross border mergers with a total transaction value of $2.21......

Words: 1321 - Pages: 6

Adas

...Федеральное государственное бюджетное образовательное учреждение высшего профессионального образования РОССИЙСКАЯ АКАДЕМИЯ НАРОДНОГО ХОЗЯЙСТВА И ГОСУДАРСТВЕННОЙ СЛУЖБЫ ПРИ ПРЕЗИДЕНТЕ РФ ИНСТИТУТ БИЗНЕСА И ДЕЛОВОГО АДМИНИСТРИРОВАНИЯ | ФАКУЛЬТЕТ МЕЖДУНАРОДНОГО БИЗНЕСА И ДЕЛОВОГО АДМИНИСТРИРОВАНИЯ Groupe Ariel S.A. Case Artyom Kirillov Polina Dzyuba Moscow 2011 Groupe Ariel S.A. : Parity Conditions and Cross-Border Valuation Question 1 There are two ways to compute the projects NPV. The first approach is to calculate it in Mexican Pesos and then change the resulting figure into Euros at the spot rate of MXN15.99/EUR. Note that the discount rate that we have used was the yield on the long-term peso-denominated corporate bonds. Below is the screenshot showing how we have done this. Computing NPV in Mexican Pesos (resulting NPV in Euros is 138,902) Question 2 The second approach is to transfer each cash flow from Mexican Pesos into Euros using the future rates (e.g. in year 5 we use the rate for this particular year......

Words: 596 - Pages: 3

Cross Border Valuation

...9-295-100 Rev. August 7, 1997 Cross-Border Valuation Cross-border investment has assumed a prominent place among the key decisions facing investors and corporate managers. In today’s increasingly global marketplace, many investment projects, corporate acquisitions and mergers have important international components. The importance of cross-border valuation methods have been underscored by trends toward the relaxation of capital controls, European economic integration, and, since the early 1990s, the opening and growth of Eastern European, Russian, Asian and Latin American markets. Cross-border acquisitions have been a particularly prevalent form of investment since 1980. American corporations, for example, increased their acquisitions of foreign targets by 160% between 1980 and 1990. Acquisitions of American targets by foreign companies rose about 50% during the same period. Some transactions, such as Matsushita Electric's $6.9 billion acquisition of MCA, Inc. in 1991, have been quite large. The majority, however, have been well under $100 million in size, suggesting that these transactions are not just the domain of giant multinationals. Evaluating crossborder opportunities is a critical consideration of executives and investors from around the world. The objective of this note is to review basic methods of valuing cross-border investments and the main issues affecting such valuations. It is intended to be a source of guidance, not a comprehensive review......

Words: 11146 - Pages: 45

Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation

...4194 APRIL 19, 2010 TIMOTHY A. LUEHRMAN JAMES QUINN Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation On June 23, 2008, a Monday morning, Arnaud Martin arrived at his office in Groupe Ariel’s corporate headquarters in Mulhouse, France. The previous week, Martin had requested additional financial information about an investment proposal from Ariel-Mexico, a wholly owned subsidiary that operated a manufacturing facility and a regional sales office in Monterrey, Mexico. The information had arrived late Friday—too late for Martin to analyze—and was waiting for him Monday morning. As a financial analyst for a global manufacturer of printing and imaging equipment, Martin examined many cross-border projects, particularly since Ariel had accelerated its move into emerging markets several years earlier. The Mexican investment proposal called for the purchase and installation of new automated machinery to recycle and remanufacture toner- and printer cartridges. Cartridge recycling had become an important part of Ariel’s business in many markets and promised continued growth. Many office product retailers operated formal toner cartridge recycling programs, for both the environmental benefits of keeping materials out of landfills and demonstrated cost savings for their customers. Writing in a leading trade journal, one analyst predicted, “We are going to see more and more refined approaches to recycling and remanufacturing [cartridges] in the coming......

Words: 3043 - Pages: 13

Ariel Group

...Caso: Groupe Ariel S.A.: Parity Conditions and Cross-Border Valuation Algunos datos importantes que nos da el caso y que utilizaremos en este análisis: • Valor de la inversión = $ 3,500,000 Pesos • Valor de la inversión = 220,000 Euros • Depreciación del equipo nuevo a 10 años. • Valor en libros de equipo manual actual $ 250,000 pesos faltando 3 años para depreciarlo. • Valor de mercado de este equipo usado $ 175,000 pesos • Ventas proyectadas en 2008 (proyectadas) = 3.35 Billones de Euros • Actividades de consultoría = 18% de las ventas totales • Utilidad Neta en 2008 = 61.2 Millones de Euros • Ariel México corrió en 2008 al 80% de su capacidad • Inflación proyectada en México del 7%. • Tasa de descuento de Ariel 8% • Tasa de Interés en Francia es del Corto Plazo 4.99%, largo plazo 4.75% • Tasa de Interés en México es del 8%, largo plazo 9.21% • Tipo de cambio de Pesos/Euros $ 20 pesos en 2011 • Tipo de cambio de Pesos/Euros $ 25 pesos en 2013-2018 Pregunta 1: Calculen el valor presente neto (VPN) en pesos de los flujos incrementales del equipo de reciclaje de Ariel México. Supongan que la inflación esperada en Francia es del 3% anual. Buscamos la fórmula del valor presente en nuestro libro de textocapitulo uno y consultamos también el capítulo 14 del libro “Economía” de Samuelson Nordhaus. Para calcula el VPN primero es necesario que calculemos los flujos incrementales de la máquina automática y la manual en moneda......

Words: 917 - Pages: 4

Cross Border Teamwork

...Exercise 2 – Cross-Border Teamwork Alexander Braeunig Ramkhamhaeng University Course: BUS 7100 – Managing Human Capital Lecturer: Prof. Dr. Aysar Sussan Term: 01/2015 Submission date: 26th of July Abstract The word “cross border teamwork” becomes nowadays more popular in every multinational organization. Global business Management needs cross-border teamwork for effective communication and contribution. Big companies have subsidiaries in various countries which differ in culture, time zone and language and other important aspects. This makes effective cross-border teamwork sometimes very difficult however it helps companies to improve competitive advantages and achieve goals properly when doing right. This exercise consists of 3 parts and focuses and setting up and forming such a team. Furthermore issues coming along with running a team and resource sharing will be discussed as well. Question 1 – Forming a cross border Team The main function of Human Resource Management is selecting and recruiting members. Virtual Teams are somehow different than local teams. It needs special qualifications such as proficiency in using communication software such a skype etc. for conferences. Furthermore an ability to form team relationships quickly and effectively is important in order to have a good engagement within the team. Proper communication both written and spoken in a virtual environment across cultures is necessary. As a next step team members must be provided......

Words: 1104 - Pages: 5

Eliminating Barriers to Cross Border Investing

...1) Better access to foreign capital markets and investment -Eliminating barriers to cross border investing Accounting information has a significant influences on the behaviour of investors and financial capital markets. The implementation of IFRS for financial reporting in Australia has allowed for better access to foreign capital markets and investment, eliminating barriers to cross border investing. The major benefits include the potential for lesser information asymmetry (Horton, Serafeim and Serafeim, 2012), improved reporting transparency, reduced information costs, increased comparability, accountability and increase in the quality of financial reporting (Ahmed, Neel and Wang, 2013). Therefore markets become more completive and efficient, benefiting investors. A major prospective benefit of implementation of IFRS for financial reporting is the increase in accounting comparability. The enhanced comparability is brought together though increased quality and convergence of accounting standards particularly in areas such as Fair value measurements, business combinations and revenue recognition (Jordan, 2013). The increased comparability hence allows Australian business to facilitate lower costs of capital and have better access foreign capital markets and cross-border investing. On the contrary however comparability may become worse in situations where IFRS implementation is not mandatory and countries have two varying accounting standards. Furthermore the full scope of...

Words: 704 - Pages: 3

Groupe Ariel Analisis

...Momento del análisis: 23 de Junio 2008 Propuesta: Subsidiaria mexicana quiere comprar una nueva máquina automatizada para reciclar y manufacturar cartuchos y tóner para impresora. Objetivo: Reemplazar el proceso manual que existe por un proceso más automatizado. Obtener ahorros en mano de obra y materiales. Costo: 3.500.000 Pesos Mexicanos (220.000 euros) Status Group Ariel: Fabricante global de impresoras, copiador y equipos de producción de documentos. Consultoria y servicio de posventa (18% del negocio). Año 2008 caida de ventas y un resultado levemente negativo. Industria afectada por la recesión mundial. Crecimiento en los mercados emergentes, que entro en 2003-2004. Negocios en 28 paises del mundo, a partir de una red de subsidiarias. Afuera de la UE se generaban el 50% de las ventas y el 40% de los ingresos. Status Ariel Mexico La razón para estar en Mexico es diversificar sus operaciones fuera de Europa y USA. Competidores haciendo lo mismo. Fuerte presencia en los mercados locales, mediantes acciones de Marketing y una presencia local. Vendían un producto con mayor durabilidad y menor costo. Vida útil 10 meses más y 30% menor costo. Investigación y diseño local, para adaptar los productos que se hacían en Francia a los gustos locales. Productos vendidos mayormente en Mexico, mediante red de distribuidoras. Insumos comprados localmente y empleados mexicanos. Año 2008  capacidad de la planta al 80%. Aumento en la demanda de cartuchos reciclados y de......

Words: 410 - Pages: 2