Seminar in Business Finance

Seminar in Business Finance: Group Project

Your group project includes two parts: Case Study & Teaching Note.

Part I:

We have studied several cases this semester which focus on a common corporate action: merger or acquisition. In your group project please select a recent M&A example, either successful or unsuccessful, recent is defined as having occurred in the last three years.

You will be tasked with preparing a case study to explain the details of the corporate action. Specifically what led to the acquirer offering for the target firm. Similar to other case studies we have analyzed this should include an explanation of the performance of the target, acquirer and industry. You should highlight any challenges the acquirer faced in pursuit of the target.

Below are steps that are necessary to complete the case study:

1. Start by researching the acquirer and the target companies. You should provide a picture of what is driving their decision to merge. What are their strengths and weaknesses? How do they differ/agree in terms of management strategy/philosophy, operations, size, financial strength, technology, etc.

2. Include an explanation of market/industry conditions and the role of the firm within the industry, for both the acquirer and target firms. How is this impacting their decision to merge?

3. Present the expected synergies of the merger.

4. Include the specifics of the acquirer’s offer and any changes to the offer prior to acceptance/rejection.

The entire case study should not exceed 5 pages, 3-5 pages is acceptable.

Part II:

In addition to the case study the group should prepare a teaching note which will address questions specific to the case. The teaching note will include an exercise to identify the value of the acquisition. The acquisition is meant to create synergy values for the combined firm. Below are the steps necessary to complete the teaching note:

1. Perform a DCF analysis of the target, with free cash flow projections for ten years past the merger year and a terminal value = [final projected year free cash flow*(1+cash flow growth rate)]/[discount rate – cash flow growth rate], and compare that with the acquirer offer. You will need to clearly identify any assumptions used when calculating NPV; specifically growth rates, inflation rates, and required return. Present at least two NPV values, one which utilizes a required return calculated with your version of beta based on three year monthly returns.

2. Present alternate strategies to the merger and evaluate the validity and likelihood of those choices.

3. Provide an epilogue to explain what actually occurred with the combined firm or in the case of unsuccessful acquisitions the surviving target. This should include stock market performance post-merger/failed merger.

The entire teaching note should not exceed 5 pages, 3-5 pages is acceptable.

Include an Excel file with any supporting exhibits, i.e. financial statements, financial ratios, DCF analysis, stock price performance, etc.

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