Case 15.5. Kraft Foods Undertakes Split-Off of Post Cereals In Merger-Related Transaction (pg. 610)
PITCH BOOKS DUE (Sections 1-12)
Case 15.6. Sara Lee Attempts To Create Value Through Restructuring (pg. 613)
Cross-Border Mergers and Acquisitions: Analysis and Valuation
Text, Chapter 17
Cross-Border Mergers and Acquisitions: Analysis and Valuation - continued
Case 17.3. Wal-Mart’s International Strategy Illustrates the Challenges and the Potential of Global Expansion (pg. 690)
Review for Final
4:30 to 6:30 P.M.
Pitch Book Requirements Objectives: This assignment addresses a goal of the course, to develop your ability to conceive and design a proposed deal. It exercises the broad range of skills developed in this course.
Form a team of 4-8 to work on the Pitch Book.
Pick the acquiring firm. It must be publicly-traded.
Choose the target. It must be publicly-traded or a division of a publicly-traded firm. It is recommended that you pick a publicly-traded target firm with whom there might be some solid strategic rationale to combine. Think seriously about the motives and economics of combination, and try to offer a hypothetical marriage that makes business sense. Your strategic rationale for this deal should be summarized clearly in your presentation, and should reflect careful thinking. You are free to choose any firm, though if you have a choice, you should avoid unnecessarily complex combinations. To spark ideas, you might consult lists of excellent firms and under performers.
Prepare the Pitch Book as if you were the VP of Corporate Development and the addressee is your CEO. As of the date of your proposal, your idea has been held secret by your team, unknown to the target firm. Your aim should be to convince the CEO to go forward with the proposed transaction, committing time and capital to consummate the deal.
Each team should address the following sections:
Executive Summary: include strategic rationale for deal, the expected purchase price, sources of synergy value, and payment terms.
Description of target company;
Describe target firm and target firm’s industry/market in terms of size, growth rate, product offerings and other relevant characteristics
Discuss why target firm was chosen among other possible firms you considered
Show historical financial performance of target company for past 3 years and include latest income statement and balance sheet
Compare target company with peers in terms of product offerings, corporate strategy, and customers. Compare financial performance in terms of sales growth rate, margins, EPS growth, ROE and leverage
Summarize target company ownership
Valuation of target company:
Show valuation based on DCF analysis (stand-alone valuation plus synergies)
Show valuation based on market multiples of comparable firms