The goal is to demonstrate your ability to conceive and design a M&A transaction. This is a group exercise. Presentations will be delivered live in class during week 11 unless otherwise noted.
1.Prepare a deal concept proposal as if you were the investment bank making the pitch to the buyer firm.
2.It is the group’s job to identify the buyer and the target using U.S. public markets. Identify a buyer and target that are average in size that would be categorized as a Mid Cap and/or Small Cap firm. You can choose any firm but I recommend that you avoid overly complex combinations. Do not pick companies that are already involved in a deal with each other. Also, consider that the target should be at least 10-15% or more of the combined firm. Finally, one thing I always need to ask the teams is, “Why would the target shareholders be willing to sell to the buyer?”
3.Organize your teams and establish leaders to work efficiently. Prepare a briefing book/file which is due earlier in the quarter (see assignment). You may want to establish a collaborative file for your research, models and presentation.
4.Prepare a pitch book according to the standards that we discussed and deliver a presentation as if you were “pitching” the management/executive team of the buyer firm. Model the deal and recommend the purchase price that will result in a successful transaction and will be acceptable to the target. Remember that your goal is to convince the CEO to move forward with the proposed transaction and hire your firm to help with the execution of the deal. Submit this pitch in powerpoint. Do not submit a written report.
5.Your presentation will be made during class, or recorded on zoom during the last week of the course.
6. General note: Always remember to provide footnotes and sources for data if necessary on the slide that the data is presented.
Outline for Project
1. Term Sheet/Executive Summary
2. Strategic/Deal Rationale
Summary of info below will be important for you to make the pitch. Include noting the type of acquisition strategy of the six discussed (Horizontal, Vertical, etc..)
3. Business Description-(very brief)
Explain the acquiring firm’s core competencies. How does the target contribute?
Explain the businesses comparatively so that the deal rational is apparent. How does the target business compliment the acquirers business?
Explain financial position and how that translates to strategic capabilities
4. Industry Overview and Positioning- Comment on the following
Industry-Attractiveness of Industry from a profit potential, position in lifecycle and business cycle, Define Peer Group, Market Share of leaders and any other components that you feel are necessary to describe the industry and buyers position to explain the deal rationale. This industry section is not just about presenting the industry. It is about presenting how the industry will impact the acquirer and the target, and how they will be better positioned within their industry. Dont just discuss the industry! Each bullet point that you present should be about your two companies within the points you are trying to make about the industry! For example, if you say, “supplier power is strong”. OK….so what? You are not finished yet!. Is your two companies different, the same, or position will be improved?
Pestle, Five Forces, and Swot – Here this is not a cut and paste!. The section will be too long. This is probably the most difficult challenge of the project. Work to focus these tools to communicate how the target will help acquirer manage change in the industry or strengthen buyers competitive advantage. For this section, is should be comparative. How does the strengths and weaknesses of the target match up with the acquirer? What weaknesses can be improved? Discuss how the five forces describes competitive rivalry? How does the acquirer benefit when combined with the target to address this competitive rivalry? (the purpose of the deal, right?). Pestle is about the opportunities and threats. How will the merger facilitate taking advantage of the opportunities, and dealing with the threats. Address all these issues specifically.
Bottom Line: Conclude on each slide on how your PESTLE, or SWOT, Or competitive rivalry changes because of your deal!
5. Relative stock performance and ownership profile
6. Contribution Analysis (Proforma)-
7. Valuation of Target. In addition, you may want to value the acquirer. How is the stock price trading relative to the intrinsic value? This may help with your deal design.
8. Merger analysis: Exchange ratio, Accretion/dilution, Synergies, Structure Analysis (100% Cash, 50% cash and 50% stock, 100% stock). Discuss closing balance sheet and pro forma analysis. For presentation, discuss your final stock/cash structure, the other two can go in the appendix.
9. Integration and Due Diligence Issues (briefly comment if necessary)
10. Bidding strategy-optional
11.Potential interlopers
12.Appendix – Insure that all valuation models, and supportive analysis to back up your slides are included in the appendix
Also note that each slide with data should state the source of the data. Otherwise a point will be taken off for each slide that does not have appropriate references. The minimum number of models, or financial support should be DCF of Target, accretion dilution analysis with different payment structures, closing balance sheet and calculation of goodwill under one scenario, Comparable Valuation tables.
ALL you need to do is “Deal Rationale” “Integration and Due Diligence” and “Potential Interlopers” parts.
You may find all the info via this link
https://drive.google.com/drive/folders/1hV8HkOicBcFVQOEJ5-23o78iualvuN3b?usp=sharing
Last Completed Projects
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