Tesla The SolarCity Acquisition Case Solution

1. The prospects for the Solar city's business are high. This is because the demand and hence the market for the solar system is expected to grow and reach 3,800,000 homes by 2020. Although there were many large players in the industry who had diversified resources, the continuous expansion of solar demand may restrict their capacity, causing the startup companies to bloom and see their markets expanding. This has been further evidenced by the expected profitability of Solar City from 2017 onwards which could be seen growing from $357 million to $1,793 million in 2021. Therefore, as an investor for me, the prospects of Solar City’s business will seem promising.

2. The comparable companies that seem to be a good match with the Solar City include Canadian Solar Inc., First Solar and Trina Solar Inc., as these are also involved in solar power products and systems solutions. In the next 10 years, its comparable companies will include Shanghai Aerospace Automobile Mechanical, as it would have likely entered into an acquisition agreement with Tesla. Based on the comparable company analysis, the deal value concerning the acquisition of the Solar City would be $3,100 million.

3. The precedent transaction gives a perception of the industry that the deal value for the five transactions that took place during the period varied considerably. Precedent transaction value is the deal value for similar companies in the industry (Chang, 1998).