Lockheed Martin’s Acquisition of Nation
Scape, Inc.
Group 13
Section: A
Case-12
SL. No. Name ID
1 Shakil Ahamed 1448
2 Hosenara Akter Daji 1711
3 Md. Mominul Islam 1502
Company Profile: NationScape, Inc.
Founded: 1955
Industry: Defense & Support Services
Headquarters: USA
Business Model: Provides peacekeeping, nation-building, and military support
services globally.
Revenue (2005): $535 million
Growth Rate (2001–2005): 45% annually
Competitive Advantage: Rapid deployment, strong government contracts, expertise
in crisis response.
Economic
Analysis
Defense Industry Growth: U.S. government defense spending has increased significantly, with
continued demand for outsourcing military support services.
Government Contracts: NSI primarily serves government agencies like the U.S. Department of
Defense (DoD), State Department, USAID, and international organizations.
Market Demand: Stability operations, reconstruction efforts, and global peacekeeping activities are
expected to drive future revenues.
Cost Structure: NSI benefits from contract-based revenue but faces risks from fluctuating government
budgets and international instability.
Mergers & Acquisitions: Lockheed Martin’s acquisition strategy aims to diversify its operations and
expand into adjacent markets like global defense services.
Industry Analysis of Nation Scape,
Inc.
Porter’s Five Forces
Bargaining Threat of
Bargaining
Threats of Rivalry power of substitutes
power of
New entrants among suppliers customers
competitors
Moderate High High High Moderate
to to
High High
PESTLE Analysis
Political Factors Economical Factors Social Factors
Growth in global defense budgets
Strong reliance on U.S. government •Need for skilled personnel with experience in
and peacekeeping expenditures
contracts Dependence on long-term government funding crisis management
International regulations •Public perception of defense contractors
Exchange rate fluctuations impacting
Changing government policies on •Challenges in workforce management due to
international operations
military cultural diversity in operations
Technological Factors Legal Factors
Integration of advanced security,
Compliance with U.S. defense procurement
surveillance, and IT systems Environment Factors
Increasing automation and AI-driven logistics regulations and international laws
Contractual risks associated with political
in military support services
Cybersecurity risks in sensitive government instability in conflict regions
Labor laws and human rights concerns •Sustainable operations in disaster-prone
contracts
in developing nations and conflict-affected areas
•Environmental impact of logistics and
infrastructure projects in war zones
•Compliance with international environmental and
• humanitarian laws
Swot Analysis of Air Sahara
SWOT Analysis
Strengths Weaknesses
Expanding domestic and international network Consistent financial losses and high operational
Strong brand with full-service offerings and costs.
customer loyalty programs Declining market share due to competition.
Innovative pricing strategies (Super Sixer, APEX Dependence on Sahara Group for funding,
fares limiting long-term stability.
Delays in regulatory approvals hindered strategic
growth.
Opportunities Threats
Growing Indian aviation market and middle-class Low-cost carriers (Air Deccan, SpiceJet, GoAir)
travel demand. capturing market share.
E hurdles delaying business decisions.
Regulatory
Environmental
Potential partnerships or mergers with stronger Economic
Factorsdownturns or fuel price hikes
airlines (e.g., Jet Airways, Kingfisher). increasing operating costs.
Employee attrition and operational disruptions
Fleet expansion and modernization to compete affecting service quality.
with rivals.
Ratio Analysis
Ratio Analysis
Air Sahara
2005 2004
Net Profit Margin 8.87% 4.57%
Profitability Ratios Return on Asset (ROA) 7.58% 4.30%
Return on Equity (ROE) 19.50% 30.46%
Current Asset Turnover 2.16 3.15
Non-Current Asset Turnover 1.67 1.14
Activity Ratios Total Asset Turnover 0.70 0.79
Equity Turnover 2.20 6.66
Current Ratio 264.42% 211.35%
Liquidity Ratio Quick Ratio 154.09% 96.38%
Debt-Equity Ratio 147.49% 599.53%
Solvency Ratio Interest Coverage Ratio E 180.14% 178.17%
Net Profit Margin Environmental
8.87% 4.57%
Total Asset Turnover Factors0.70 0.79
DuPont Analysis Equity Multiplier (Asset/Equity) 3.12 8.39
Return on Equity (ROE) 19.50% 30.46%
Problem Statement
Should Air Sahara respond to Jet Airways’ attempt to
renegotiate the acquisition price?
Different Scenarios
Renegotiate with Jet Airways
Operate independently with fresh
capital infusion
Risk Analysis
Financial Risk Premium
1.45%
1.5%
Business Risk Premium
Calculation of Discount Rate
Particulars Air Sahara Jet Airways Discount Rate for Synergy
Risk Free Rate 6.50% 6.50% 6.50%
Beta 1.2 1.1
Market Risk Premium 5.00% 5.00%
Cost of Equity 12.50% 12.00%
Cost of Debt 9.50% 9.50%
Tax Rate 30% 30%
After tax Cost of Debt 6.65% 6.65%
WACC 10.75% 9.97% 10.36%
Size Premium 2%
Additional Premium 2%
Risk Adjusted WACC 13.00% 9.97% 12.51%
Valuation Of Jet Airways
Enterprise Value 1236994
Add: Cash 122424
Less: Debt 263073
Less: PV of Agency Cost (1.5%) 24740
Equity Value 1071605
Share Price Before Announcement ₹1,128.70
Market Capitalization Before Announcement ₹1,000,000
Number of Shares Outstanding 88,597,502
Value per Share ₹1,209.52
Assumptions
Revenue Growth Rate 15.00%
Total Expenses (Excluding Depreciation & Interest) 65.00%
Depreciation/Amortization 15.00%
Tax Rate 20.00%
Capex Rate 12.50%
Change in NWC 4%
Terminal Growth 3.00%
Agency Cost 2.00%
Valuation of Jet Airways Monte Carlo
Simulation
• Co-efficient of Variation
0.1518 of Air Jetways-
Monte Carlo
Valuation Of Air Sahara
Enterprise Value 179017
Add: Cash 10558
Less: Debt 44,340
Less: PV of Agency Cost (1.5%) 5371
Equity Value 139865
Assumptions
Revenue Growth Rate 15.00%
Total Expenses (Excluding Depreciation & Interest) 65.00%
Depreciation/Amortization 15.00%
Tax Rate 20.00%
Capex Rate 12.50%
Change in NWC 4%
Terminal Growth 3.00%
Agency Cost 2.00%
Valuation Of Air Sahara-Monte Carlo Simulation
• Co-efficient of Variation
0.1472 of Air Jetways-
Monte Carlo
Expected Synergy
Expected Synergy
Revenue Increment 169,512
Cost Reduction 157,202
Tax Savings 7,887
Total Synergy Value 326,714 Assumptions
Cost Savings Rate 3.00%
Probability of Synergy Gain 50% Terminal Growth Rate 2.50%
Revenue Increment Rate 4.75%
Expected Synergy 163,357 Cost of Revenue 65.00%
Effective Tax Rate 20.00%
Discount Rate for Synergistic Benefits: 12.51%
Discount Rate for Cost Synergy 13.71%
Discount Rate for Revenue Synergy 15.66%
Discount Rate for Tax Synergy 12.71%
Valuation of Synergy- Monte Carlo
Simulation
• Co-efficient of Variation
0.3587 of Air Jetways-
Monte Carlo
Post Merger Value
Post Merger Firm Value & Share Price of Jet Airways (In 100,000 Rs.)
Particulars Air Sahara Jet Airways Combined
Equity Value 139864.73 1071604.96 1211469.70
Synergy Value 163356.92
Post Merger Firm Value 1374826.62
Less: Transaction Cost (5%) 41244.80
Combined Equity Value 1333581.82
Total Number of Shares 88597501.55
Value Per Share 1505.21
Current Share Price of Jet Airways 1149.90
Return to Jet Airways shareholders 0.31
Recommendations
Particulars Jet Airways Air Sahara Post Merger
Equity Value 1071605 139865 1211469.70
Value Per Share ₹1209.52 - ₹1505.21
A
Any
Question?
. .
E
Environmental
Factors
