How would you value AdMob at the end of 2009:
(i) as a stand-alone firm, and
(ii) as an acquisition target.
A B C D E F G H Google Inc J K L Risk Free Rate, 1-year Treasury Note: 2 Average for May, 2010 0.35% Risk Free Rate, 10-year Treasury Note: 3 Average for May, 2010 3.42% Required Market Risk Premium relative to 10-year Treasury Note 5% - 6% 5 Beta 1.12 Google's estimated ke (based on case 6 Exhibit 18) 7 Adjustment for Size, Liquidity 15% Admobs Cost of Equity Capital 9 Admob's FCF Estimates (in 10 millions) 12/31/2013 12/31/2012 12/31/2011 12/31/2010 12/31/2009 11 Net Revenues $146.48 $107.04 $55.68 12 EBIT(1-T) $77.93 $31.29 $13.97 $11.83 $15.35 13 Depreciation $10. 10 $7.31 $5.32 $2.57 14 Capex $23. 18 $10.67 5 Change in NWC $11.91 $11.37 6Free Cash Flows $137.24 $28.45 $7.56 $11.34 ? AdMob's Terminal Value estimates Warranted MV firm / EBIT (1-tax 12/31/2013 12/31/2012 12/31/2011 12/31/2010 12/31/2009 8 rate), using Google's 2009 multiple Warranted MV firm / Sales, using 9 Googles's 2009 multiple 20 21 Value of AdMob Using, Warranted MV Firm / EBIT (1- 22 tax rate); as multiple Using, Warranted MV Firm / Sales; as multiple 24 26 27 28 29 Google-AdMob Deal Sheet1 + Ready + 1009 Google Inc. 's Acquisition of AdMob Exhibit 4. Google Inc.'s Historical Balance Sheets 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002 Currency USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands USD (in thousands USD (in thousands USD (in thousands) USD (in thousands) Consolidated Yes Yes Yes Yes Yes Yes Yes Yes Cash & Equivalents 10. 197,588 8,656,672 6,081,593 3,544,671 3,877,174 426,873 148,995 57,752 Short Term Investments 14,287.187 7.189,099 8, 137,020 7,699,243 4,157,073 1,705,424 185,723 88,579 Cash & Equivs & ST Investments 24,484,775 15.845,771 14,218,613 11,243,914 8,034,247 2,132,297 334,718 146.331 Receivables (ST) 3,178,471 2,642,192 2.162,521 1.322,340 687.976 311,836 154,690 61,994 Current Tax Assets 667,650 286.105 213,791 29,713 49,34 89.972 :2, 105 12.646 Other Current Assets 836,062 1,404,114 694.213 443.880 229,507 159,360 48.721 10,825 Total Current Assets 29, 166,958 20,178, 182 17,289,138 13,039,847 9,001,071 2,693,465 560,234 231,796 Gross Property Plant & Equip 8,130,134 7.576,341 5,519,912 3,289,594 1,417,425 583,068 261.837 86.886 Accumulated Depreciation 3,285,524 2,342,498 1.480,651 894,355 455,676 204,152 73,582 33,013 Net Property Plant & Equip 4,844,610 5,233,843 4,039,261 2,395,239 961,749 378,916 188,255 53,873 Long Term Investments 128.977 85.160 1,059,694 1,031,850 Intangible Assets 5,677,503 5,836,544 2,745,964 1,891,960 277,683 193,887 105,556 96 Deferred LT Assets 262,611 33,219 11,590 0 Other Assets 416,119 433,846 168,530 114,455 31.310 35,493 17,413 1.127 Total Assets 40.496,778 31,767,575 25,335,806 18,473,351 10,271,813 3,313,351 871,458 286,892 Accounts Payable & Accrued Exps ,892,307 1,522,194 1,392,497 933,204 530,134 237,847 168,369 37,022 Accounts Payable 215,867 178,004 282, 106 211,169 115,575 32,672 46,175 9,394 Accrued Expenses 1,676,440 1.344,190 1,110,391 722.035 414,559 205,175 122,194 27,628 Current Debt Current Lease Obligations 1,902 4,621 4.350 Other Current Liabilities 855, 160 779,896 643,105 371,383 215,250 100,619 62,462 48,13 Total Current Liabilities 2,747.467 2,302,090 2,035,602 1,304,587 745,384 340,368 235,452 89,508 LT Debt & Leases 1,988 6,512 Deferred LT Liabilities 41.618 12.333 30,249 60,427 45,887 7,443 23,524 2,481 Other Liabilities 1,703,469 1.184,290 580,276 68,497 61,585 36,484 21,724 14.438 Total Liabilities 4,492,554 3,528,713 2,646, 127 1,433,511 852,856 384,295 282,688 1 12,939 Common Share Capital 318 315 313 309 293 267 161 145 Preferred Share Capital 44.346 44.346 Additional Paid-In Capital 15,816,738 14,450,338 13,241,221 11,882,906 7,477,792 2,582,352 725,219 83,410 Retained Earnings 20,082,078 13,561,630 9,334,772 5,133,314 2,055,868 590,471 191,352 85,704 Accum Other Comprehensive Income 105,090 226,579 113,373 23,311 4.019 5,436 1.660 49 -249,470 -39,701 Other Equity 83,348 -6,677 -119,015 -373,968 Total Equity 36,004,224 28,238,862 22,689,679 17,039,840 9,418,957 2,929,056 588,770 173,953 40,496,778 31,767,575 25,335,806 10,271,813 3,313,351 871,458 286,892 Total Liabilities & Equity 18,473,351 8 @ HEC Montreal
