Business Valuation of Keystone Research Proposal

Pages: 5 (1256 words)  ·  Bibliography Sources: ≈ 2  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

Business Valuation of Keystone

The process of business valuation is a complex one and the specialized literature on the topic is vast, but fails to offer an integrant perspective on the actual elements which should be addressed and contained within a business valuation report. This particular paper aims to achieve a gradual business valuation of Keystone by assessing the steel industry, the company, the competition, the offer and the advantages and disadvantages of controlling a public organization. Based on the findings, the final recommendation is that of purchasing the interests in Keystone.

Keystone Consolidated Industries Inc.

The best means of assessing the company is that of looking at its strengths and weaknesses. The strengths include the following:

Keystone is a reputable manufacturer of wire products, industrial wire and wire rod, using steel as its main commodity

The company enjoys a favorable reputation due to its vast expertise and product applicability in several fields

The organization is vertically integrated, which has materialized in numerous benefits, such as lower production costs or a decreased dependency on the industry

Keystone has carefully selected its customers as being reliant, stable and less influenced by cyclic stages

The levels of business diversification are generally increased, with the company also activating in plastics distribution, gardening products or scarp recycling

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Major investments have been made in technological, infrastructure and production capabilities, which could materialize in excess production to be sold within the international market

The weaknesses include:

Keystone reveals high levels of debt, which in turn lead to negative perceptions relative to the efficiency of the managerial act and the actual capabilities of the firm

Inventory operations are fairly reduced, meaning that in cases of large and unexpected orders, shortages and impossibility of delivery could be met

Research Proposal on Business Valuation of Keystone Assignment

All employees are protected under unions, implying additional personnel expenditure

Inefficiencies exist relative to the amounts of wire rod shipped (43.6% in 2001) and the sales they generate -- 25.6% of the total sales (Keystone Exhibits, steel and wire product mix, p.5)

3. The Steel Industry and Competitors' Analysis

The steel industry is mainly characterized by the threat of cheaper imports, which significantly reduce the demand for national products. This has manifested in the closing down of more than 20 steel-based products manufacturers in the past five years. The current threat of foreign imports onto Keystone is fairly reduced due to the lack of distributors to offer overseas products to the company's main customers. Movements within this apparently mature industry still occur and materialized primarily in mergers or files for protection under bankruptcy laws. The future, nevertheless, is expected to bring about a regeneration of this sector.

In its essence, the steel industry is extremely dynamic and competitive, meaning that we, as the prospective owners of Keystone Consolidated would have to invest large sums of money into the continuous development of the company in overcoming the competition and addressing the shifting needs of consumers. Large competitors derive their strength through economies of scale, whereas smaller size entities address local markets and serve niche needs. Forces which impact the competitive strength include the distribution channels used by manufacturers, the strength of their brands, the retail price implemented or the quality of the products manufactured and services delivered. The largest competitors of Keystone are USX-U.S. Steel Group, AK Steel Holding, Nucor Corp., Bethlehem Steel, National Steel, Weirton Steel and Rouge Industries. The largest threats are however posed by the most similar competitors -- Oregon Steel Mills and Insteel Industries (Keystone Workbook, Competitor Data).

4. Financial Analysis

The Financial Analysis revolves around the presentation of the financial highlights and the comparison of the financial ratios against industry averages. In terms of financial highlights, as evolution throughout the past five years, the following are of the utmost importance:

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Business Valuation of Keystone.  (2009, October 21).  Retrieved November 28, 2020, from https://www.essaytown.com/subjects/paper/business-valuation-keystone/16999

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