The Omni Services INC.: Company Value Report

Introduction

Omni Services Inc. is a rental linen service whose headquarters are located at Culpeper in Virginia. In the process of offering its services, the company has faced stiff competition from other companies in the industry; like ‘The Socie’te’ Ge’ne’rale’ de Location et Services Textiles’ which is a French Company that has more promising services. As a result, Omni Services Inc. lost its good reputation and consequently, its rate of capital turn-over dropped significantly. This paper would present the plans made by The Omni Services Inc. so as ensure that, the company is in a better position to be sold to ‘The Socie’te’ Ge’ne’rale’ de Location et Services Textiles’.

The Omni Services Inc. position and aspirations

Perhaps, Omni Services Inc. founder, Martin had tried various ways and means to upgrade the company. In this aspect, the company could be more effective in services provision but all was in vain as ‘The Socie’te’ Ge’ne’rale’ de Location et Services Textiles’ was very enormous and highly reputed. In his pursuit to reinstate the company, Martin had acquired various management personnel which he thought would transform the company and make it better; but all was in vain. After various meetings with the company’s stakeholders, Martin together with the company management decided that; the company ought to be sold to the French Company, ‘The Socie’te’ Ge’ne’rale’ de Location et Services Textiles’.

Initially, the agreement to sell The Omni Services Inc. seemed to be an easy task since the accord would spread the purchase of the company for over five years. As it came out to be; the process of establishing valuations and discounting of the company’s capital over its leased period became a problem. Meanwhile, the management of Omni Services Inc. engaged Hudson Securities to value the Company’s shares and devise the formula for pricing the remaining shares in the year 1985. Generally, this process of valuation of the available stock was to give a base for the overall pricing of the company; which was agreed to be negotiated later by Martin and the other senior management staff in the company.

The Omni Services Inc. valuation

To ensure an effective valuation of the company’s position, the Hudson Securities was conducted. This was to ensure that, its general pricing worked well as it would provide Martin with the limit of the general price of the company. The following table represents the total valuation of Omni Services Inc. from the year 1980 to 1984.

Using the discounting rate of 15%, the Terminal Value of the company was also calculated which amounted to $ 36,216,218. As it came out to be, the terminal value of this company was less than its total discounted cash flow which also amounted to $ 42,641,838. This implied that the company’s income position in the future would be very promising. Lastly, the discounted cost factor per share was calculated whose value was found to be $ 71.07.

Conclusion

Generally, the management of The Omni Services Inc. came to recognition that; the present value of the company was higher than it was merely thought in which its pricing was to be based. Using the discounting factors of 15%, the cash flow of the company implied a better future for the company which provided credentials for its pricing.