Assume you are the CFO of Phlanders Flange Company and write a substantial and formal memo describing the issues you might have with Harry's proposal. Remember, Harry is your boss (the CEO), so be professional and tactful in your writing!

At a minimum, your memo to Harry should address the following items: - Do Harry's calculations over- or undervalue Framingham, and what are the potential consequences? - A discussion of value assessments in mergers. - How the long-term growth rate of the target affects premium to be paid for the target's stock. - Effects of synergies and bias. - Your recommendation of what additional steps Harry should take before making the offer and why.

Here is the analysis:

The Plander Flange Company has been doing quite well lately and would like to accelerate its growth within the flange industry. Harry Flatiron, the firm's CEO, has become interested in growth through acquisition becasue of some exciting articles in the business press. In particular, he's interested in a frindely acquisition of the Framingham Flange Factory whose general manager, Jack Daniels (a major stockholder in Framingham), he's known for some time.

Harry is prone to quick action based on brief analyses that he does himself. In the past, his instincts have been pretty good, and this style has not as yet caused any major mistakes. Harry has taken Framingham's own estiamte of its future cash flows and long-term growth rate along with synergies he and Jack have estimated to come up with a projected value for the company. All this has led to a proposal to offer Franmigham's stockholders a 60% premium on the price of their stock.

You're Phlander's CFO, but Harry has done all this on his own. He's about ready to make a verbal offer to Framingham's management, and has asked you to check over his figures. His arithmetic is correct, but you'revery concerned about the validity of his assumptions.