FINS5538 Takeover, Restructuring and Corporate Governance
\nSemester 2 2018
\nAssignment Task:
\nThe objective of this assessment is to develop and test your ability to prepare an
\nacquisition proposal for a prospective corporate bidder and provide all the information
\nrequired to initiate a bid for a prospective publicly listed target (public M&A).
\nScenario:
\nYour task is to act as an investment bank pitching an M&A deal proposal to a potential
\nbidder interested in expansion\/investment opportunities in the Australian market. To
\nidentify this deal, you need to scout the ASX market (the target and bidder must be public
\ncompanies) to look for potential targets that may be undervalued or bidder\/target pairs
\nthat may have strong synergy potential \/ strategic fit. It will be up to you to gather all
\ninformation required on both the target and the bidder.<\/p>\n
Overview:
\nYou should take the following steps to complete in the project:
\n1. Identify a potential bidder.
\n2. Identify a company that would be a good acquisition target and provide a detailed
\nstrategic rationale (including a consideration of the risks) explaining why.
\n(Note that your client will be the bidder, NOT the target. Further note, the
\nbidder\/target combination should be your own idea and can not be a public
\nM&A transaction which is occurring or has occurred in the past – whether
\nsuccessful or not)
\n3. Analyse the industry and competitive landscape
\n4. Estimate and quantify the potential synergies between the bidder and the target
\n5. Conduct a valuation of the target company. Do a comparable company analysis
\nand comparable transaction analysis. Also do a basic DCF valuation based upon
\nforecast free cash flows. Show that the value to a prospective acquirer exceeds the
\nexpected acquisition price. Show the financial impact of the transaction on the
\nbidder – in particular EPS accretion\/dilution and capital structure impacts
\n(incorporating your financing plan)
\n6. Develop an appropriate and well considered offer structure and financing plan
\n7. Identify any completion risks or impediments to a takeover including external
\nregulatory approvals, shareholder approvals, potential target resistance etc
\nFormat:
\nEach group must submit a proposal in the form of a pitch book, which is a set of
\nPowerpoint presentation slides summarising the key selling points and considerations
\nrelated to the deal. The body of the PowerPoint presentation should have no more than
\n25-30 slides. Any supporting documents (such as valuation methodology and detailed
\nassumptions etc) are in addition to this limit but must be included in Appendices. The
\nslides must not be filled with text such that the presentation essentially constitutes a
\nwritten report. Pitch book examples will be provided.
\nEach group will be asked to present the pitch book to the rest of the class in a 12-15
\nminute presentation, followed by 3 minutes for questions. All members must speak.
\nPreparing your Pitch book:
\nThe pitch book is a presentation to the BIDDER. It should be prepared for senior
\nmanagement and\/or the board of the company. It should be succinct but compelling. It
\nis essentially a \u201csales document\u201d that provides the bidder with all the information they
\nneed to determine whether they will go ahead with the deal.
\nSuggested topics to be covered by the pitchbook:
\n1. Executive summary
\nThis should be a one page summary which highlights the most important points about
\nthe investment opportunity. It should contain your recommendation regarding the target,
\na brief strategic rationale, deal structure, offer price and valuation range, offer structure,
\nsources of financing, key benefits\/costs, financial impact on the bidder, any potential
\nissues, risks and key conditions.
\n2. Target Overview
\n\u2022 Industry and market overview
\n\u2022 Industry forces driving a merger
\n\u2022 Business and product description of the target
\n\u2022 Current strategies
\n3. Merits of the deal
\n\u2022 Deal rationale \/ strategic fit
\n\u2022 Potential sources of synergy \u2013 (see quantification below)
\n\u2022 Control benefits
\n\u2022 Competitive landscape after the deal and future strategies
\n\u2022 Brief assessment of possible business and\/or integration risks post completion
\n4. Financial analysis and projections
\n\u2022 Financial analysis, including ratio analysis, which supports your M&A valuation
\n\u2022 Identification of comparable firms and comparable deals
\n\u2022 Quantification of synergies (specific estimates and justification)
\n\u2022 DCF valuation using defensible forecast cash flows, discount rate and discussion of
\nkey assumptions
\n\u2022 Valuation of the target based on comparables and DCF
\n\u2022 Accretion \/ dilution analysis and impact on capital structure
\n\u2022 Sensitivity analysis
\n5. The Transaction Proposal
\n\u2022 Pricing recommendation (anticipated premium) and justification (eg football field)
\n\u2022 Proposed structure (merger, off\/on takeover, Scheme of arrangement etc)
\n\u2022 Offer Structure (cash, stock, mix) and detailed justification
\n\u2022 Financing plan and justification including a thorough credit analysis and rating (or
\nshadow rating) assessment
\n\u2022 Completion risks and mitigants (including potential regulatory approval risks,
\nshareholder approval risks etc)
\n\u2022 Target defenses (if any) and consequent bidding strategies
\n\u2022 Key offer terms and conditions (if any) and their justification
\nResearch Resources:
\nThe following resources may assist you in your research with your company:
\nCompany Website: offers basic information and profile of the company.
\nCompany Annual Reports: can be found in the Connect 4 database in the library website
\nYahoo! Finance: offers basic pricing information for comparable listed firms.
\nFinAnalysis and DatAnalysis: These two databases are very important sources of
\nfinancial information for peers and other firms in the industry. Detailed financial figures
\ncan be obtained and used to make comparisons. Industry (e.g. biotech,
\ntelecommunication, etc.) ratios can also be calculated using the FinAnalysis database.
\nThe textbook and lecture notes can be used to understand relevant theories.<\/p>\n","protected":false},"excerpt":{"rendered":"
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