1. How should private equity firms value cross-border acquisitions? (A) Ulysses, a Boston-based private equity firm, specializes in transportation with a focus on emerging capital markets. It has identified Salgacoar Ltd., a family-owned business group headquartered in Goa (India). Salgacoar is involved in three businesses: iron ore mining in the State of Goa, ocean-going freighters, and hotels. Each division is cash-flow positive. Its shipping division generated earnings after taxes of INR 4 billion. Two publicly listed shipping companies on the Mumbai stock exchange have P/E multiples of 8 and 9.2, respectively Maersk, the giant Danish shipping and container company, is listed on the Copenhagen Stock Exchange and has a P/E of 13.5.

a. What is your value estimate for Salgacoar’s shipping business? Spell out the assumptions that you are making in answering.

b. If it turned out that Salgacoar had signed a three-year charter for 70 percent of its fleet, how would you adjust your response to part a?