Corporate Finance Assessment The coursework CANNON EXCEED 14 PAGES OVERALL including front page and appendices (10

mark penalty). Manuscripts should be DOUBLE-SPACED, with a MINIMUM FONT SIZE OF 11 PT, ARIAL, and printed on the TWO SIDE of paper. All pages should be NUMBERED CONSECUTIVELY and STAPLED. Project grades will be based on: 1) completeness; 2) Clarity; 3) Accuracy; 4) Depth; 5) Coherency; 6) presentation. Coursework Case Study Write a case study report that provides a detailed analysis of an all-cash domestic (Firms from same country) M&A deal involving public companies that was both announced and completed in 2008. Your report MUST show all formulae, inputs & assumptions, and have the following structure: details Front Page: Title(s) and group composition only (e.g., no abstract) Abstract: What you do in your report and summary of results. Be informative and focused Introduction: What you do. Why it is interesting (motivation). Your main findings. Organization of report (one very small paragraph) Company Overview: Bidder & Target. Description with emphasis on products/services/markets. Stated sources Deal: Description. Rationale. Strategic aspects and performance. Do peer comparison for both strategy and performance for the 3-years pre-deal period Critical Evaluation: Estimate synergies. Was the offer price fair? Compare your estimated combines firm value with the Enterprise Values (not Market Cap) right after the deal. Was the alternative followed the best one (qualitative, not quantitative)?. Be critical Conclusion: Focus on your main findings, 3-year post-integration period (combined company and peers), and lessons from your results References Some possible data sources Annual reports; BankScope; Bloomberg; Business Insights; Company Analysis; Factiva; FAME; Financial Times; Nexis; ORBIS; OSIRIS; Perfect Filings; SDC Platinum; The Economist; Thomson Datastream; Thomson One Banker; Zephyr Indicatives # pages 1.0 0.5 1.0 2.0 3.0 4.0

2.0 0.5

CW Coverage -Abstract: What you do in your report and summary of results. Be informative and focused Do not be general This is your own abstract, specific to your CW, so emphasize the findings and not the structure (the organization of the report comes in the Introduction). Rules of thumb: if your abstract could be used by students doing CW on other deals without any changes then it is too general. -Introduction: What you do. Why it is interesting (motivation). Your main findings. Organization of report (one very small paragraph) Provide a compelling overview of the deal. Organisation of report; the next section descrbies XXX. Section 3 Provides XXX. ETC. -Company Overview: Bidder & Target. Description with emphasis on products/services/markets. Stated sources For each company give an overview of their history. Present their range of products and/or services, and mention also the countries (markets) where they operate. Pie Chart are always very useful here. Time is the end of 2007. Give source of data (Quantitative/Qualitative). -Deal: Description. Rationale. Strategic aspects and performance. Do peer comparison for both strategy and performance for the 3-years pre-deal period Deal Description: Present information on deal e.g., attitude (friendly/hostile), company sizes, deal value, premium, multiple rounds of bidding, multiple bidders. Strategic aspects: Explain the reasons for the deal (e.g., synergies). Choose 2-to-3 peers for bidder and 2-to-3 peers for target. 4 overall if bidder and target are competitors (i.e., operate in the same industry). For each company (bidder and target) and respective competitors discuss their corporate activity (i.e., M&A, divestitures) in the 3-year pre-deal period. Were they all doing the same or not; Were they all doing M&A? Were peers doing divestitures but not M&A? ETC. This analysis will tell you about the uniqueness or not of your deal in the industry(ies) of the companies involved. Performance: Present performance ratios for bidder, target, and peers: Profitability, Leverage, Liquidity, Solvency, Efficiency (one ratio for each measure will do). Do not present 3-years averages only as I would like to see the yearly ratios. Consolidate analysis of strategy and performance is there a link? -Critical Evaluation: Estimate synergies. Was the offer price fair? Compare your estimated combines firm value with the Enterprise Values (not Market Cap) right after the deal. Was the alternative followed the best one (qualitative, not quantitative)?. Be critical Use the spreadsheet available in Session 2, You might wish to check M&A documents on Perfect Fillings (Available on-line) If you are having difficulties finding information on synergy values. In some databases you might need to tick something like Dead company or All companies to get data for the target. Please check last terms sessions on cost of equity, cost of debt, cost of capital, how to project growth rates, company valuation, ETC. Data: Revenues and EBIT are end 2007 figures (unless this was a very unusual year, e.g., losses, extraordinary asset sales, in which case you may look 2-to 3 years back to have an idea of pattern). Betas, Rf, RP, should also be computed at the end of 2007- they can be obtained straight from Bloomberg (no need to adjust beta; Rf is 3-months rate; RP over say 20 years finishing end 2007). For the other inputs it may be helpful to look 2-to-3 years back to make sure the values are fairly stable or to identify patterns. Please be aware that expect for Revenues and EBIT all other inputs are forward looking, so you actually need figures that proxy for annual averages for the next say 5 years(if this is the length of your high-growth period). The tax rate should be the effective (if you cannot find it use the ratio Taxes payable/Taxable Income). There are two growth rates, high-growth and stable. For the high growth use Reinvestment rate times After-tax ROC. For the stable growth rate use one of three assumptions (first two we discussed last term; third is from Damodaran): 1) Equal to GDP growth rate of the Economy; 2) Equal to average/median growth rates of mature peers; 3) Equal to Rf. The Reinvestment Rate in the stable growth period is given by the stable growth rate divided by the

Rwacc (because we assume no excess returns in the stable growth period i.e., After-Tax return on capital = cost of capital; see session 2, slides 7&8) You need to explain all inputs very well: Sources, assumptions you made. Note: your assumptions need to be based on facts, so if e.g., nothing is mentioned in your deal about increased debt capacity you cannot make this one up (so no synergy here); but if something is mentioned in your deal about increased debt capacity but no percentage is given, then you need an assumption. Compare the offer with your estimate of the maximum price the bidder should pay for the target (check Session 2). Here you could either your own estimate of the target stand-alone value or the enterprise value of the target (end 2007) for the Status Quo valuation. Do not forget to add your estimated synergies to compare to the offer price. In this way you can comment on whether they overpaid or not. Compare the Enterprise firm value (end 2008, form a database) with your estimate of combined firm value to check if your estimates were fairly accurate. At the end comment on whether this was a good deal. In particular, was this corporate action the best the company could have done? Should they have acquired another company? Should they have not done anything at all? Perhaps used different means of payment? Should they have done something completely different e.g., divestiture of a division? Or just grown organically? Be critical, be very critical, either way (whether you agree or not with this deal-really explain your reason). -Conclusion: Focus on your main findings, 3-year post-integration period (combined company and peers), and lessons from your results Talk about main findings. What happened in the 3-year period after the deal (strategy, Performance)? Implications for similar cases. What have we exactly learnt in this case?

Topics Abstract(5%) Introduction(5%) CompanyOverview(10%) Deal Rationale (20%) Critical Evaluation(35%) Conlusion(15%) Well presentation(10%) General Comments

<ok

Ok

>ok

Comments

Coursework should be handed in by 20 Feb 2012

ht