Question 1
On 18 October 2022, Westpac announced an acquisition bid for Tyro payments. You have the stock
prices for Westpac and for Tyro and the ASX 200 index level. The deal was cancelled on 12 December
2022. Westpac is one of Australia’s largest four banks. Tyro is a fintech focusing on payment
processing. Undertake the following and where necessary upload your working:
a) [5 marks] Around the announcement of the deal, calculate the CAR and the BHAR for both
Westpac and Tyro. The goal is to determine the market’s reaction to the announcement. Thus,
please specify the window(s) over which you calculate the CAR and BHAR and why you have
chosen those windows. Please also indicate how you calculate the CAR and BHAR.
b) [4 marks] Why might the market have reacted in the manner that it did?
c) [3 marks] The deal was cancelled on 12 December 2022. How did the market react to the
cancellation. Consider both Westpac’s and Tyro’s stock price. Explain your calculation.
d) [4 marks] Explain why the market might have reacted in the manner that it did for both of these
companies.
Question 2
Which of these is correct about Poision Pills?
a) A. Poison pills never benefit shareholders
b) B. Poison pills involve creating two or more categories of director that are elected at different
times
c) C. Poison pills always benefit shareholders
d) D. Poison pills are common place in Australia
e) E. Poison pills especially benefit acquirers in acquisitions.
f) Two of the above (A-E are correct)
g) Three of the above (A-E are correct)
h) Four of the above (A-E are correct)
i) Five of the above (A-E are correct)
j) None of the answers is correct
Question 3
You are considering whether takeover activity clustered in the United States in 2022. You have data for
the number of takeover transactions in each industry and the number of firms in each industry .
Determine whether there is any evidence of clustering of takeover activity (and state how you calculate
this). Please also upload your workings.
Question 4
Consider Tesla. In our simplified version, suppose Tesla has three divisions: Cars (including EVs and
autonomous vehicles), Solar, and Vehicle Insurance, usually to Tesla owners. Tesla's "primary" business
is in cars. It sells EVs and can track customers' driving habits, safety profiles, and other data. Tesla only
sells EVs. The solar division includes solar panels and battery electricity storage. The insurance division is
primarily to Tesla owners.
Suppose that Tesla is considering demerging into three entities: solar, cars, and insurance. Critically
evaluate the advantages and disadvantages of the demerger given what we have discussed in class and
the facts presented and surrounding Tesla as a company.
Question 5
Consider the following fact scenario: Corporation XYZ has a CEO and a board of directors. Suppose XYZ
is listed in Australia. The CEO manages several companies but the primary one is corporation XYZ. He is
politically active and often espouses polarizing opinions on matters unrelated to XYZ's core activities.
The CEO's salary is partly tied to the firm's asset size. The shareholder base (i.e., cap table) is as follows:
Passive superannuation funds own 25% of the shares; the CEO's family trust owns 15% of the shares,
and the remainder are owned by ordinary retail investors. All directors, other than the CEO, are
independent directors.
Consider the fact scenario given and critically evaluate the firm's corporate governance and any conflicts
that arise. Better answers will be specific and will connect the answer to what we discused in class and
will cite references.
Question 6
Consider this scenario: The RBA 'cash rate' (i.e., official policy rate) is 4.10%. There have been 12 rate
increases. However, the market expects relatively few additional rate hikes, and prices are generally at
high valuations. Further, there has been a significant push into AI. However, there have been some
concerns about the risk of a recession and an increase in unemployment. Energy prices have been
volatile, especially when considering the underlying commodities. Australia is attempting to establish a
Free Trade Agreement with the EU.
Critically evaluate how these factors might influence takeover activity in Australia. As always, better
answers will be specific and will specifically refer to matters discussed in class.