Painting by (Financial) Numbers: The Acquisition of Valspar by Sherwin-Williams

Marco Pagani, San José State University, Benjamin Anderson, San José State University, Kay Hodge, University of Nebraska at Kearney
January 1, 2017
North America
Accounting & Finance, Strategy & General Management
18 pages
finance, Investment Analysis, business valuation, mergers and acquisitions
Student Price: 
$4.00 (€3.75)
Average rating: 

This decision-based case is concerned with the proposed acquisition agreement of The Valspar Corporation by The Sherwin-Williams Company. The acquisition would create the largest firm in the global paints and coatings industry. The acquisition also contained an uncommon price contingency in case antitrust regulators mandated asset divestitures. The acquisition benefited the Valspar shareholders, but the Sherwin-Williams shareholders could not be sure that the transaction produced any value. The students are placed in the role of the Sherwin-Williams’ shareholders, and they need to assess whether the acquisition created value for their investment.

Learning Outcomes: 

1. Analyze the strategic rationale for the acquisition.

2. Evaluate the probability of the acquisition feasibility.
3. Compute the intrinsic value of the firm using the Discounted Cash Flow method

and employ the Weighted Average Cost of Capital (WACC) as the discount rate. 4. Explain the impact of long-term growth rate assumptions on the intrinsic equity

5. Compute the firm and equity relative value using trading peer-company multiples. 6. Evaluate an investment strategy based on estimated stock prices.