Valuation of Target Companies Assignment | Essay Help Services

Take Home Assignment Period
May 2020 (Element 011)
Faculty
Business and Law
School
Economics, Finance and Law
Module Code
MOD004169
Module Title
Mergers and Acquisitions – The Financial Managers’ Dimension
Level & credit volume
Level 7; 15 Credits
Number of questions
1
Number of pages
5
Name of tutor
Dr Idibekeabasi Ukpong
Coursework Guidelines (see Turnitin Submission Guideline for further details)
1. Save the final file as a pdf file using the SID number as the file name for Turnitin submission.
2. Adhere to the 2,000 word limitation. ±10% is allowed, but no more than that. There will be a 10% penalty if the assignment is too short or too long.
3. The word count excludes tables, charts, graphs, formulas, appendices and reference list. In sum, the word count refers only to the narratives.
4. The reference list must consist of reputable and/or peer-reviewed sources. There is no set minimum or maximum number of references allowed. Please refer to the Turnitin submission guideline document posted on Canvas.
5. The formatting must follow the Harvard Referencing guidelines (6th Edition version 6.1 September 2017) for both the construction of the reference list and the proper in-text citation formats – pay attention to §3.1 in particular.
6. The reference list should be named as such, i.e. do not use ‘bibliography’.
7. Label all tables, charts, graphs, formulas accordingly and cite the appropriate sources when applicable.
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13. Turn-on the spell check in the Word processor. Use either British English or American English, but be consistent throughout.
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14. Check Turnitin access at least one week prior to submission. The deadline for Turnitin submission is on 07 May 2020 at 2PM.
Mitigation – Academic Regulations (Eleventh Edition August 2018) 6.102 – 6.132
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COURSEWORK – ELEMENT 011 VALUATION OF TARGET COMPANIES
1. Valuation is the essence of finance. It asks the question, “What is the ‘fair’ price to pay for an asset that has a set of uncertain future cash flows?” In element 010, you had the opportunity to study valuation literature to critically assess what makes a target company attractive to acquire. For this coursework, you will perform empirical research on identifying target companies based on what you previously studied. As always, it is strongly recommended that you finished the Bloomberg Market Con- cepts (BMC) certification before you attempt to do this coursework. A particular emphasis is on ‘Module 4’ of the BMC on the topic of Equity.
The task: You need to discuss first the use (pros and cons) of valuation methods in general. You are to select two pairs of acquirer-target public companies in order to identify potential targets using the most relevant data for these companies. The two target companies must come from the same industry, but the bidders can be from a different industry. You can choose these companies from any country in the world, but I would advise you to focus on US, UK or EU market since there are more data available for these companies (e.g. on Bloomberg). Use reasonable judgement in terms of how many years of data you require, but at the very least, you should use a minimum of 5 years.
Whilst the following list is not exhaustive, some of the examples include the use of:
• Financial statements and pro-forma analysis:
• Ratio analysis;
• Decomposition analysis;
• Cash flow analysis;
• Pro-forma financial statements;
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• Sensitivity, scenario and Monte Carlo simulation analyses.
• Traditional valuation methods:
• Earnings multiples;
• Discounted cash flow models
• Alternative valuation methods:
• Relative valuation methods (price multiples, enterprise value multiples);
• Direct valuation methods (discounted cash flow models, economic income mod- els, real option analysis (e.g. Black-Scholes and NPVq/Cumulative Volatility Approach)).
• Financial reporting and tax considerations:
• Business combination issues;
• Non-controlling interests;
• Accounting for goodwill;
• Tax considerations;
• Tax considerations for good will.
The above list is just a suggestion and not compulsory in anyway. If you have your own preferred methods based on your literature study, by all mean, use them.
Your work will be assessed using the following criteria:
(i) Good introduction, conclusion and recommendations [15 Marks]
(ii) High quality references, proper reference list following ARU Harvard Referencing Guide and correct in-text citations [15 Marks]
(iii) Rationale for your valuation methods [30 Marks] This is where you demonstrate the rationale for your chosen valuation methods. You need to critically discuss why you think that your chosen methods are optimal in the valuation process of your chosen companies.
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Valuation is an art, and thus, there is no right or wrong answer per se, however, the rationale should be clearly articulated and debated at some details.
(iv) Analysis of your results from the methods chosen. [40 Marks] In this part of the coursework, you need to display the results of your analysis and explain the justification of your results (i.e. do they make sense considering the companies that you chose?) Are there other elements that perhaps you have not considered that would be beneficial to add? Based on your results, did you make a good choice? Are you recommending the acquisitions to proceed? Etc. You can include relevant detailed tables in the appendix section where they will not be counted as word count.
(v) Penalty adjustment [10% of Total Marks]
Please carefully read through the ‘Turnitin Submission Guideline’.
[TOTAL: 100 marks]
END OF COURSEWORK