Deluxe Corporation Case Study Analysis For Education

Exhibit TN1 DELUXE CORPORATION Analysis of Flexibility by Rating Category AAA AA A BBB 1 Pretax cost of debt (case Exhibit 9) 5.51% 5.52% 5.70% 6.33% 2 23.4 13.3 6.3 3.9 (case Exhibit 6) Estimate of Maximum Debt Capacity 3 $359 $359 $359 $359 4 Maximum interest implied by rating $15 $27 $57 $92 5 Maximum total debt implied by rating $279 $490 $1,002 $1,456 6 $200 $200 $200 $200 7 Maximum interest implied by rating $9 $15 $32 $51 8 Maximum total debt implied by rating $155 $272 $557 $810 Estimate of Unused Debt Capacity 9 $161 $161 $161 $161 10 Maximum debt implied by rating $279 $490 $1,002 $1,456 11 Unused debt capacity at current rating $117 $328 $840 $1,294 12 Unused debt capacity until investment-$1,535 $1,325 $813 $358 Estimate of Capital Structure 13 $2,665 $2,665 $2,665 $2,665 14 Maximum debt implied by rating $279 $490 $1,002 $1,456 15 Total debt/capital implied by rating 9.5% 15.5% 27.3% 35.3% Notes: (1) Normalized five-year EBIT is the average of EBIT forecasted over 2002 - 2006 in (2) Downside is EBIT is estimated by Rajat Singh in the case text. Required EBIT interest coverage ( x ) Normalized 5-year EBIT 1 (case Exhibit 4) Downside EBIT 2 Book value of Deluxe's existing debt 3 grade rating is lost (at BB) Deluxe Corp. market value of equity 4 (3) Book value of debt in 2001 is listed in case Exhibit 3, and is comprised of long-ter million), short-term debt ($150.0 million) and current maturities of long-term debt ($1 (4) Market value of equity in 2001 is estimated as the year-end share price, $41.58 tim shares outstanding, 64,102,000 (see case Exhibit 1).

Transaction Description
In October of 2016, Deluxe Corporation (NYSE:DLX) announced that it had acquired Data Support Systems, Inc. (“DSS”), based in Omaha, Nebraska. DSS provides back office payment processing, dispute management, and case management automation solutions for all types of transactions for financial institutions and retailers. This acquisition will enhance Deluxe’s extensive suite of services for financial institutions, utilizing the proprietary DSS technology platform.


Cherry Tree’s Role
Cherry Tree was engaged by Deluxe to advise the company in its acquisition of DSS, working with their Wausau Financial Services business and the corporate development team in evaluating the business case, negotiating the terms of the transaction, providing financial modeling and valuation analysis, supporting the due diligence process, and facilitating the closing of the transaction. 


About Deluxe Corporation

Deluxe is a growth engine for small businesses and financial institutions. Nearly 4.6 million small business customers access Deluxe’s wide range of products and services including customized checks and forms, as well as web-site development and hosting, email marketing, search engine optimization and logo design. For financial institutions, Deluxe offers an expanding suite of customer lifecycle management solutions that include industry-leading check program management, customer acquisition including targeting & campaign services, account activation & retention, fraud, security, and risk management services. Deluxe is also a leading printer of checks and accessories sold directly to consumers. For a company profile, please visit


About Data Support Systems, Inc.


About Cherry Tree & Associates

DSS develops, sells, and supports the industry-leading TRIPS Suite, which is a fully integrated and image based set of back office process automation and case management solutions for all types of transaction and dispute processing in financial institutions and retailers of every size. DSS products include universal payments solutions for exceptions processing, incoming and outgoing returns, image exchange, adjustments, dispute processing, domestic and international collections, archive, and web delivery/decisioning. DSS is headquartered in Omaha, Nebraska. For more information, please visit

Cherry Tree & Associates, LLC is a private investment banking firm headquartered in Minneapolis, Minnesota, specializing in serving entrepreneurially-managed companies. Founded in 1980, the firm provides financial advisory engagements for buyers, sellers, and companies seeking growth capital, and provides fairness opinions and other valuation services.


Cherry Tree Deal Team


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