FINS5538 Takeover, Restructuring and Corporate Governance
Semester 2 2018
Assignment Task:
The objective of this assessment is to develop and test your ability to prepare an
acquisition proposal for a prospective corporate bidder and provide all the information
required to initiate a bid for a prospective publicly listed target (public M&A).
Scenario:
Your task is to act as an investment bank pitching an M&A deal proposal to a potential
bidder interested in expansion/investment opportunities in the Australian market. To
identify this deal, you need to scout the ASX market (the target and bidder must be public
companies) to look for potential targets that may be undervalued or bidder/target pairs
that may have strong synergy potential / strategic fit. It will be up to you to gather all
information required on both the target and the bidder.
Overview:
You should take the following steps to complete in the project:
1. Identify a potential bidder.
2. Identify a company that would be a good acquisition target and provide a detailed
strategic rationale (including a consideration of the risks) explaining why.
(Note that your client will be the bidder, NOT the target. Further note, the
bidder/target combination should be your own idea and can not be a public
M&A transaction which is occurring or has occurred in the past – whether
successful or not)
3. Analyse the industry and competitive landscape
4. Estimate and quantify the potential synergies between the bidder and the target
5. Conduct a valuation of the target company. Do a comparable company analysis
and comparable transaction analysis. Also do a basic DCF valuation based upon
forecast free cash flows. Show that the value to a prospective acquirer exceeds the
expected acquisition price. Show the financial impact of the transaction on the
bidder – in particular EPS accretion/dilution and capital structure impacts
(incorporating your financing plan)
6. Develop an appropriate and well considered offer structure and financing plan
7. Identify any completion risks or impediments to a takeover including external
regulatory approvals, shareholder approvals, potential target resistance etc
Format:
Each group must submit a proposal in the form of a pitch book, which is a set of
Powerpoint presentation slides summarising the key selling points and considerations
related to the deal. The body of the PowerPoint presentation should have no more than
25-30 slides. Any supporting documents (such as valuation methodology and detailed
assumptions etc) are in addition to this limit but must be included in Appendices. The
slides must not be filled with text such that the presentation essentially constitutes a
written report. Pitch book examples will be provided.
Each group will be asked to present the pitch book to the rest of the class in a 12-15
minute presentation, followed by 3 minutes for questions. All members must speak.
Preparing your Pitch book:
The pitch book is a presentation to the BIDDER. It should be prepared for senior
management and/or the board of the company. It should be succinct but compelling. It
is essentially a “sales document” that provides the bidder with all the information they
need to determine whether they will go ahead with the deal.
Suggested topics to be covered by the pitchbook:
1. Executive summary
This should be a one page summary which highlights the most important points about
the investment opportunity. It should contain your recommendation regarding the target,
a brief strategic rationale, deal structure, offer price and valuation range, offer structure,
sources of financing, key benefits/costs, financial impact on the bidder, any potential
issues, risks and key conditions.
2. Target Overview
• Industry and market overview
• Industry forces driving a merger
• Business and product description of the target
• Current strategies
3. Merits of the deal
• Deal rationale / strategic fit
• Potential sources of synergy – (see quantification below)
• Control benefits
• Competitive landscape after the deal and future strategies
• Brief assessment of possible business and/or integration risks post completion
4. Financial analysis and projections
• Financial analysis, including ratio analysis, which supports your M&A valuation
• Identification of comparable firms and comparable deals
• Quantification of synergies (specific estimates and justification)
• DCF valuation using defensible forecast cash flows, discount rate and discussion of
key assumptions
• Valuation of the target based on comparables and DCF
• Accretion / dilution analysis and impact on capital structure
• Sensitivity analysis
5. The Transaction Proposal
• Pricing recommendation (anticipated premium) and justification (eg football field)
• Proposed structure (merger, off/on takeover, Scheme of arrangement etc)
• Offer Structure (cash, stock, mix) and detailed justification
• Financing plan and justification including a thorough credit analysis and rating (or
shadow rating) assessment
• Completion risks and mitigants (including potential regulatory approval risks,
shareholder approval risks etc)
• Target defenses (if any) and consequent bidding strategies
• Key offer terms and conditions (if any) and their justification
Research Resources:
The following resources may assist you in your research with your company:
Company Website: offers basic information and profile of the company.
Company Annual Reports: can be found in the Connect 4 database in the library website
Yahoo! Finance: offers basic pricing information for comparable listed firms.
FinAnalysis and DatAnalysis: These two databases are very important sources of
financial information for peers and other firms in the industry. Detailed financial figures
can be obtained and used to make comparisons. Industry (e.g. biotech,
telecommunication, etc.) ratios can also be calculated using the FinAnalysis database.
The textbook and lecture notes can be used to understand relevant theories.
Previous answers to this question
This is a preview of an assignment submitted on our website by a student. If you need help with this question or any assignment help, click on the order button below and get started. We guarantee authentic, quality, 100% plagiarism free work or your money back.
Get The Answer