VALUATION OF A PRIVATE ELEMENTARY SCHOOL ACQUISITION: A CASE STUDY OF BTB SCHOOL
The YAB foundation (not the real name) is considering the acquisition of a private elementary school in Bandung as part of its strategic expansion in the education sector. This acquisition is intended to further the mission of YAB to provide highquality education and support regional educational dev...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/85867 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | The YAB foundation (not the real name) is considering the acquisition of a private elementary school in Bandung as part of its strategic expansion in the education sector. This acquisition is intended to further the mission of YAB to provide highquality education and support regional educational development. This research evaluates the financial viability of the proposed acquisition, providing decisionmakers with important insights into the viability of the investment and the associated risks. Financial analysis uses the discounted cash flow (DCF) method, using a discount rate of 11.33% to calculate the net present value (NPV), the internal rate of return (IRR), the payback period (PBP), and the profitability index (PI). Additionally, sensitivity analysis and Monte Carlo simulation were conducted to identify the variables that most significantly impact the valuation and to assist in effective risk management.
The analysis reveals that the initial investment required for the acquisition is Rp 22,500,000,000. The results of the financial analysis indicate a negative NPV of Rp -5,059,749,781, an IRR of 6.88%, a PBP of 8 years and 1 month and a PI of 0.78. These results suggest that the acquisition may not be financially viable under current assumptions. Sensitivity analysis highlights critical factors influencing the valuation, such as the acquisition offer price, salaries and benefits, student enrollment, school fee rate, and the weighted average cost of capital (WACC). The Monte Carlo simulation results show a 16.85% probability of achieving a positive NPV, with an 83.15% probability of a negative outcome, further highlighting the need for a reassessment of the acquisition offer price and associated financial assumptions. To improve financial viability, the research recommends negotiating a lower acquisition price, with Rp 14,900,000,000 identified as a more viable offer, along with implementing cost-control measures, increasing student enrollment, optimizing school fee rates, and maintaining effective financial planning.
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