Select a listed company for which you might wish conduct a buyout/ takeover. This can be any listed company for which you can obtain information. You can obtain financial information from the SEC Edgar Filings (http://www.sec.gov/edgar.shtml) . Sites such as Yahoo Finance and Google Finance have information. Bloomberg (accessible in the library) has financial information. The purpose of this project is to look at why the firm might be a buyout target. To do this, your project present an investment thesis for why you would acquire this firm. When doing this, consider the factors we have discussed about why a firm might be an attractive target. The following are relevant factors to consider.
1. Evaluate the firms business and industry position. Discuss the strengths, weaknesses, opportunities, and threats in this respect.
2. Evaluate the firms corporate governance. What changes would you make to the firms governance? These changes could involve changes to board composition, compensation structure, and compensation programs.
3. Provide a valuation for the firm. The valuation can be a discounted cash flow valuation or can be a multiples-based valuation. Better answers will provide both. Consider the following:
a. What is the firms current valuation (i.e., pre-purchase valuation)? Here, for example the firm may (but need not) be in stable growth. Provide a price-per-share and a firm valuation. Do not worry if the valuation you obtain is significantly different from the firms current price I am more interested in whether you know how to value a company.
b. What would the firms valuation be following the purchase? For example would there be a super-normal growth period; how long would this last? Valuations are inherently difficult to do. I am more interested your ability to value firms than I am in accuracy per se. A simple approach to this would be to (a) value the firm now assuming it is at stable growth; (b) value the firm following the takeover assuming it will have a supernormal growth period.
4. In the term sheet, what key items might you include
5. How would you intend to exit the deal? (i.e., IPO, takeover; which is realistic?)
Final Project. The project envisages a buyout/PE type scenario. Imagine that you are a VC/PE fund. Select a public company in which you might wish to invest. Provide a business case for that investment. The business case includes:
Present an overview of the company
Discuss the companys corporate governance: what aspects of management are beneficial; what aspects of the management would you change; how would you incentivize/ contract managers
Discuss the companys industry and how it influences the investment case
Provide a valuation for that company
Discuss any risks associated with the transaction