FINS5538 Major Assignment
Term 2 2024
Assignment Task:
The objective of this assessment is to develop and test your ability to prepare an
acquisition proposal for a prospective corporate bidder and provide all the information
required to initiate a bid for a prospective publicly listed target (public M&A).
Learning Outcomes:
At the completion of this assignment, you are expected to demonstrate the ability to:
• collect and compile important financial information
• employ relevant technical skills to conduct quantitative and qualitative business analysis
• apply relevant M&A theories and concepts to a specific deal
• summarise and present all relevant information effectively to a prospective acquiror
• work cooperatively in a group where all members make significant contributions
Scenario:
Your task is to act as an investment bank pitching an M&A deal proposal to a potential
bidder interested in expansion/investment opportunities in the Australian market. To identify
this deal, you need to scout the ASX market (the target and bidder must be public
companies listed on the ASX) to look for potential targets that may be undervalued or
bidder/target pairs that may have strong synergy potential and strategic fit. It will be up to
you to gather all information required on both the target and the bidder.
Teams:
Form into groups of no more than 4 and no less than 3 people.
Advise Robert Bishop of team members by Friday the 21st June (week 4) by email at
robert.bishop@unsw.edu.au. It is fine if you do not wish to form your own group. In this
case, you will be allocated randomly into groups of 4 by Monday 24th June.
Overview:
You should take the following steps to complete in the project:
1. Identify a potential bidder.
2. Identify a company that would be a good acquisition target and provide a detailed
strategic rationale (including a consideration of the risks) explaining why
(Note that your client will be the bidder, NOT the target. Prepare the pitch from the
bidder’s viewpoint. Further note, the bidder/target combination should be your own
idea and cannot be a public M&A transaction which is occurring or has occurred
in the past 3 years - whether successful or not).
3. Analyse the industry and competitive landscape
4. Estimate and quantify the potential synergies between the bidder and the target
5. Conduct a valuation of the target company. Do a comparable company analysis and
comparable transaction analysis. Also do a basic DCF valuation based upon
forecast free cash flows. Show that the value to a prospective bidder is equal to or
exceeds the expected acquisition price. Show the financial impact of the transaction
on the bidder - in particular EPS accretion/dilution and capital structure impacts
(incorporating your financing plan)
6. Develop an appropriate and well considered offer structure and financing plan.
Outline the sources and uses of funds
7. Identify any completion risks or impediments to a takeover including external
regulatory approvals, shareholder approvals, potential target defences etc
Format:
Each group must submit a proposal in the form of a pitch book, which is a set of PowerPoint
presentation slides summarising the key selling points and considerations related to the
deal. The body of the PowerPoint presentation should have no more than 25-30 slides.
Any supporting documents (such as valuation methodology and detailed assumptions etc)
can be included in addition to this limit but must be included in the Appendices (I encourage
you to include all meaningful supporting data you can, but leave them in the appendices).
The slides must not be filled with text such that the presentation essentially constitutes a
written report. Pitch Book examples have been provided on Moodle.
Each group will be asked to present the pitch book to the rest of the class in a 15-minute
presentation, followed by 3 minutes for questions. All members must speak.
Preparing your Pitch book:
The pitch book is a presentation to the BIDDER. It should be prepared for senior
management and/or the board of the company. It should be succinct but compelling. It is
essentially a “sales document” that provides the bidder with all the information they need to
determine whether they will go ahead with the deal.
Suggested topics to be covered by the pitchbook:
1. Executive summary
This should be a one page summary which highlights the most important points about the
investment opportunity. It contains key points such as: identification of the bidder and target,
analysis of the target, a brief strategic rationale, deal structure, recommended offer price
and valuation range, offer structure, sources of financing, key benefits/costs, financial
impact on the bidder, any potential issues, risks and key conditions.
2. Target Overview
• Industry and market overview
• Business and product description of the target
• Current strategies
3. Merits of the deal
• Deal rationale / strategic fit
• Industry forces driving a merger
• Potential sources of synergy – (see quantification below)
• Control benefits
• Competitive landscape after the deal and future strategies
• Brief assessment of possible business and/or integration risks post completion
4. Financial analysis and projections
• Financial analysis, which supports your M&A valuation
• Identification of comparable firms and comparable deals
• Quantification of combined synergies and control benefits (specific estimates and
justification)
• DCF valuation using defensible forecast cash flows, discount rate and discussion of
key assumptions
• Valuation of the target based on comparables and DCF
• Sensitivity and/or scenario analysis
• Football field analysis
5. The Transaction Proposal
• Recommended offer price (anticipated premium) and detailed justification
• Proposed structure (merger, off/on market takeover, Scheme of arrangement etc)
• Offer Structure (cash, stock, mix) and detailed justification
• Financing plan and justification including a thorough credit analysis and rating (or
shadow rating) assessment
• Accretion / dilution analysis and impact on capital structure
• Completion risks and mitigants (including potential regulatory approval risks,
shareholder approval risks etc)
• Target defenses (if any) and consequent bidding strategies
• Key offer terms and conditions (if any) and their justification
Appendices with supporting documentation
• More detailed information about the industry, the acquirer, the target, and the deal
• More detailed descriptions of the main assumptions
• More detailed tables and financial analyses (include key Excel tables here)
Presentation:
All presentations will be conducted in-class. All group members must attend LIVE at the
allotted time and speak in relatively equal time allocations.
Research Resources:
The following resources may assist you in your research with your bidder and target:
Company Websites: offers basic information and profile of the companies
Company Management Presentations and Annual Reports: can be found on the
Company websites and on FACTSET
FACTSET: detailed security information and valuation information. You will be given a
login for the term. Detailed financial figures can be obtained and used to make
comparisons. Industry (e.g. biotech, telecommunication, etc.) ratios and M&A history can
also be viewed.
UNSW Library Reports: FinAnalysis and DatAnalysis are two databases which are good
sources of financial information for peers and other firms in the industry. IBIS reports
(search IBIS on the UNSW library website) give excellent industry overviews, including
market share, competitive landscape etc
The textbook and lecture notes can be used to understand relevant theories.
Due Date and Assignment Submission:
A PDF copy of the pitch book is due on Monday the 29th July by 10pm (Week 10). There
will be a link set up on Moodle for your group to submit (each group only has to submit one
presentation). The actual presentations will occur during week 10 (date to be decided). The
above deadlines apply irrespective of the order in which your team is presenting.
Contributions and Responsibilities
Group assignments can sometimes attract a “free-rider” who fails to make a fair contribution
towards the assignment workload. When you establish your group, you should clearly plan
and allocate each team member’s workload. Write down the division of tasks among group
members and a timeline of agreed due dates for various components of the assignment.
All of this information can be used to resolve group conflicts, review individual members’
performance and address issues concerning any student who is deemed to have not made
a fair and reasonable contribution well before the submission date.
It is imperative that any group conflicts are brought to the attention of the Lecturer-In-
Charge (LIC) early. Records of communication, meeting attendances, and input documents
should be kept. In the event of a serious group conflict, where there is disagreement about
individual contributions, the LIC will adjust the marks individually based on this additional
information. However, if left too late, it will not be acceptable for the other team members
to use this as an excuse for the quality of their submission.
Course Weighting:
The assignment will be marked out of 30 and will comprise 30% of your total mark for the
subject. 25 marks will represent a “team mark” and will be common to all team members.
5 marks will represent an “individual mark” and will apply to each separate team member.
In most cases, the individual mark will also be common among all team members.
However, if an individual is assessed as making a contribution which is materially above or
below the other team members, there will be scope for the individual mark to differ within
the same team.