Melissa Bockhold Heather Coddington - Franklin College

Exhibit C shows the cash flows for Silver Lake and their partners over the length
of their investment. The NPV calculations, as well as the IRR and Modified IRR, are all
displayed below.
NPV IRR Modified IRR
3 years (2000-2002) $1,819,306,394 177.34% 73.26%
4 years (2000-2003) $2,657,283,378 189.37% 68.23%
5 years (2000-2004) $2,756,587,640 182.91% 57.25%
From these figures, we can see that at an investment level of $800 million, Silver
Lake and their partners are investing in a project with a very significant NPV. The
modified IRRs show that as long as Silver Lake’s required return is less than 57.25%, the
investment in Seagate should be accepted. The IRRs are modified to ensure the rate is
conservative and eliminates the possibility for multiple IRRs in the calculation of NPV.
It is very doubtful that Silver Lake would require a return anywhere close to 57%, so it
seems feasible to state that the projected valuation of $2 billion, along with the
recommended capital structure, fits the needs of Seagate with the profitability objectives
of Silver Lake.
D. Needs and Concerns of VERITAS
The final question that needs to be addressed before the LBO can take place is
making sure that VERITAS is in agreement and satisfied. After Seagate sells its disk-
drive business to the Suez Acquisition Company, which Silver Lake created for the
buyout, the only significant assets left are cash and VERITAS shares. VERITAS was the
most likely merger, but it had no desire to acquire a disk drive business. VERITAS’s
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