To make an informed decision as to whether you, as a corporate manager, should acquire a
potential target company, you need to do your own research. This assignment will give you an
opportunity to get a full picture of a real-world merger decision by applying your critical
reasoning and analytical problem-solving skills to a real-life case study. You will analyse a
chosen deal and the questions should be answered from the perspective of a corporate manager
or a consultant hired to advise on the deal.
You can choose any successful deal “completed” before 1 Jan 2017: the only requirement is
that both bidder (acquiring) company and target (acquired) company should be listed on the
stock markets (not necessarily the same market for example, target from ASX and bidder from
NYSE, target from NASDAQ and bidder from LSE, etc.), which is necessary for you to
conduct some empirical analyses. Your main task is to provide answers to the following
questions (details in the following) on your chosen deal.
Deal motivation (10 marks)
Why does bidder want to buy target? Assess the strategic rationale of the deal, motivated from
the acquirer’s perspective with reference to the potential benefits, risks and opportunities.
Target evaluation (10 marks)
• Analyse the bid price as offered by the bidder on the announcement day of the merger.
Your valuation should include target’s valuation on a standalone basis using either
Discounting Cash Flow (DCF) method or price multiples method (P/E, EV/EBITDA,
P/Sales, etc).
• Describe how you would evaluate synergy in general (you are not required to evaluate
the synergy of your chosen deal). How much is the value of synergy as suggested by
the bidder, target or analysts?
• Explain whether the offer price is within a fair value range based on your estimation.
Deal structure and target strategy (10 marks)
• Describe the structure of the deal (off-market takeover bid, scheme of arrangement or
market takeover bid).
• Analyse the payment method of the deal and discuss the capacity of bidders to increase
their bid.
• Has target implemented any defence strategy during the course of the deal and how
effective are these strategies (if any)?
Market reaction (10 marks)
• Evaluate the short-term market reaction (for both bidder and target) around the deal
announcement and the long-term market reaction after the completion of the deal using
event-study method (check lecture slides page 11 and page 50 for a brief introduction
to event study)
• Interpret your estimation in terms of wealth transfer and wealth creation and relate it to
the motivation(s) of the deal.
Presentation and references (10 marks)
• Word limit: 1500 to 1800 including charts and tables and excluding reference list.
• Data resources must be appropriately acknowledged (in-text or in footnotes). Citations
and the reference list must be prepared following Harvard style referencing.
• You can present the answers using a report format or simply answer the questions one
by one. However, make sure to edit your assignment before submitting. The font, size,
alignment, line space must be consistent throughout. Tables and diagrams should be
numbered and captioned. You are expected to use tables and charts to summarise or
emphasise findings but the information in a table/chart must be referred to and clearly
explained in-text.
3. Marking criteria
This assignment will be marked out of 50 marks and he allocation of marks is indicated in
Section 2. The total mark will be scaled to be out of 25 marks, accounting for 25% of the course
total.
The criteria below will be followed when marking the assignment:
• The extent and quality of critical reasoning/critical thinking
• The quality of written English.
• The demonstration of knowledge of relevant theory.
• The successful collection and interpretation of relevant data. All calculations must be
clearly explained. Important assumptions must be justified.
• The extent to which the work is clearly and concisely presented.
4. Data resources
Recent mergers list
You can find the list of public mergers reviewed by ACCC using the following link:
http://registers.accc.gov.au/content/index.phtml/itemId/751043
Please note that not all the mergers reviewed by ACCC are successfully completed. You must
use completed deals to conduct your research.
It is recommended to look at large deals as more information is available.
Share prices and company financials
Morningstar provides a handy way to download past P&L and Balance sheets of most listed
companies. It can save you having to enter every single figure from annual reports into your
valuation spreadsheet. It’s accessible through the Macquarie Uni Library website.
• Go to: https://www.mq.edu.au/on_campus/library/
• In the multi-search textbox type “morningstar datanalysis” and press enter.
• Click the top search result.
• On the ‘Links’ column on the right hand side click “DataAnalysis premium”.
• Search for your stock using its ticker and then go to “Financial Data” and “Download
spreadsheet”, circled below: