TAC613: Mergers & Acquisitions - Group Case Study - Management Assignment Help

Assignment Task:

Background 

Your group works in the M&A division of IMC Bank. The head of your division has asked your group to  identify an ASX 300 company1in the Consumer Discretionary sector or the Consumer Staples sector that can  benefit from an acquisition in near term. For this potential bidder’s board of directors, your group should prepare a briefing book or “pitch book” making a case for the acquisition of a specific target company. 

In selecting the proposed target company, your group should ensure that the proposed acquisition “fits” into the  existing overall business strategy of the potential bidder company. The head of your division holds the view that  related (in terms of product and/or market to bidder’s existing operations) acquisitions involve less risk.  Accordingly, unrelated acquisition proposals will need to be justified by additional potential benefits. 

There are no specific financial parameters for the acquisition other than that the acquisition price must exceed  A$200 million, that the target should be a member of the ASX All Ordinaries Index, and that the acquisition can  be financed by the potential bidder company through the issue of debt or equity or from existing resources  without exceeding prudent gearing levels in the long term. 

Requirements 

Your group’s task is to prepare a “pitch book” on a proposed takeover containing the following contents: 

The “pitch book” should be in the form of a series of power point slides. It should be divided into a  “presentation” section and an “appendices” section. The slides in the presentation section will not include  detailed analyses. They will include summary statements in bullet point format in which you develop your  argument with graphic illustrations (tables may also be used as necessary). Detailed analyses should be  presented in the appendices. All pages should be printed in “landscape” orientation and should contain  appropriate heading. All slides should be numbered. It will be up to your group to appropriately distribute the  relevant contents between the “presentation” section and the “appendices” section for the maximum impact of  your presentation. The exceptions to this are the few cases below where explicit guideline is provided that the content should be in either the “presentation” or the “appendices” section. 

Your “pitch book” may contain up to 30 slides (pages). 12-15 of these should be for the “presentation” section,  with the balance belonging to the “appendices” section. 

1 Other than Woolworths, as its is already being advised by your bank.  

A. Deal Rationale [30 marks] 

A series of slides will justify the deal concept and explain the logic of the deal. These slides will address the  following points:  

? Overview of the potential bidder and the target 

? Potential bidder and target’s segment analysis (appendices) 

? Potential bidder and target company’s industry analysis using the factors (five forces and others) discussed  in the lectures 

? Potential bidder and target company’s company analysis: this will involve both qualitative and quantitative  analysis 

? Potential bidder company’s strategy analysis and its merger strategy analysis 

? Comparison of the target company with peers (appendices) 

? Target’s management and management quality 

? Deal Rationale 

o This slide will include qualitative discussion of the sources of synergies and value creation as well  as why the deal makes sense in a long-term or “strategic” sense 

o You need to bring together the analyses in the preceding points and other deal motivations to fully  justify the choice of the target and the sources of synergy and value creation 

B. Valuation [30 marks] 

A series of slides will value the target company by itself (stand-alone valuation), and separately value the  potential synergies from the acquisition: 

? DCF Assumptions: you should state the assumptions in one slide in the “presentation” section and explain  these assumptions in another slide in the “appendices” 

o The assumptions will include your forecasts about revenue growth, profit margin etc. ? Stand-alone DCF analysis of the target (in appendices): follow the standard DCF method ? DCF sensitivity analysis and DCF scenario analysis 

? Comparable valuation using comparable listed companies 

? Comparable valuation using comparable precedent transactions 

? Overall standalone valuation and sensitivities/scenarios based on the three above valuation methods: these  should be summarised in terms of valuation ranges in the “presentation” section with supporting tables in  the “appendices” section 

o Use a valuation football field in the “presentation” section 

? Sources of synergies --- show calculations on the sources of synergy and value creation o You should have a separate slide that addresses this issue and identifies each of the sources and  explains the assumptions regarding the potential value creation from these sources in some detail.

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