25575 – Financial Situation and Investment Banking Assignment - UTS

Assignment Task

Company Presentation

The goal of this section is to give the reader a clear picture of the target company, its business model, growth opportunities and financial situation. After reading this section the client should understand the current financial situation of the company and its prospects.

You should try to provide a complete picture of the company including:

• Historical Profitability and growth
• Leverage and financial soundness
• Future prospects

To complete this section, you should find all the relevant information in FactSet. You can also find information on the website of the company. If you are interested in having a better grasp on the industry where the company operates you can check IBIS World reports via the UTS library. The industry outlook section of the report can be particularly useful, especially to think about scenarios and synergies

Industry

The goal of this section is to give the reader a clear picture of the Containers and Packaging industry, its current state and its future prospects. After reading this section the client should understand what the main risks and growth drivers in this industry are and how these translate into the assumptions you have embedded into your profitability model.

Deal Structure

The talks between your client and the target have settled on a deal for the acquisition of the equity of the target where all the existing debt of the target will be ported into the new entity

You should consider two different deal structures for the deal:

1. One where the amount of equity and debt used to finance the deal are chosen to maximize the profitability for the acquirer under your “baseline” scenario with synergies (see paragraph 5 below for a description of the scenarios).

2. One where the deal is financed with equity only.

3.1 Funding and Financing Costs

After consulting with your capital markets division, you estimate that the deal could be financed with a combination of the following sources of funds:

Profitability Analysis

The goal of this section is to provide the reader with an estimate of the profitability of the deal (Accretion in your year 1, the first full year after the pro-forma) under a number of possible scenarios.

Operating Scenarios

You will have to analyse the profitability of the deal under two operating scenarios.

1. Baseline This scenario will be based on your best assumptions on the evolution of the two firms standalone

2. Pessimistic This scenario is designed to capture a pessimistic outlook. This is not a “major stress” scenario, but simply a scenario where the economic environment for the next 2-3 years is unfavourable, in line with “tough times” (but not exceptionally so) for this industry.

You will have to model three scenarios for your synergies

1. Baseline

This scenario will be based on your best assumptions on the deal synergies assuming an ordinary evolution economic environment.

2. Pessimistic

This scenario is designed to capture your assumptions on the deal synergies if the evolution of the economic environment is unfavourable (the pessimistic environment previously described). To be clear this is not a pessimistic scenario for the synergies, but your assumption of synergies in the pessimistic operating scenario. If you think that the economic environment has no effect on your ability of extracting synergies, this scenario would be the same as the baseline.

3. No Synergies. This scenario simply assumes zero synergies

Structure of the presentation

There is no formal requirement on the length of your presentation but from the example posted you will see thatthis type of document usually has between 15 and 30 slides including appendices. Here is an example breakdown of the body of the presentation.

The Deal Structure

Portion of the presentation should contain: the presentation of the optimized deal structure and the analysis of the leverage and liquidity of the resulting entity under the two possible deal structures (optimized and equity only) and the two operating scenarios. From reading this part the reader should understand how the credit risk of the company will evolve. For example, would the pessimistic scenario push the company close to default if we use the optimized financing structure?

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