|
Background
你是一个非常大的零售公司的财务总监，全球15个国家设有专卖店，在美国andin，特别是在中美洲和亚洲。你的店卖的bothgroceries和一般商品。在2007年，你的公司，总部设在纽约证券交易所上市的美国相关的，价值在100美元以下的十亿，butsubsequent的事件在股票的市场和产品市场的严重低迷的itsvalue，令投资者失望。
You are the Finance Director of a very large retail company, with stores across the US andin 15 countries worldwide, particularly in Central America and Asia. Your stores sell bothgroceries and general merchandise. In 2007 your company, with headquarters in the USand listed in the New York stock exchange, was valued at just under US$100 billion, butsubsequent events in both the stock market and product markets severely depressed itsvalue, leaving investors disappointed.
Your company is facing increasing competition in its main markets, and declining profitmargins. Over the next twelve months it will need to invest heavily into reorganising andaltering its portfolio of products, following changes in consumers’ preferences and demand.In addition, your company has had to face an increasingly contentious public image.Specific criticisms include the company's extensive foreign product sourcing, low rates ofemployee health insurance, resistance to union representation, and alleged racism, amongother things.
The company is considered by the Board of Directors to be financially sound with plenty ofcash reserves and a good mix of debt/equity in its capital structure and certainly within itstarget ratio. However, the solid financial performance in the last financial year has done littleto offset a drop in investors’ confidence as a result of the credit crisis. During the last Boardmeeting the CEO informed the Board that: “There is now considerable pressure from themain shareholders to take measures to improve the value of our company, otherwise ourdepressed stock market value could make us a potential takeover target.” Therefore, theBoard asked the CEO to find a suitable acquisition target company.
The CEO believes that it is strategically important for the company to further diversifygeographically and improve its public image. After considerable research, data gatheringand analysis, the CEO has focussed her attention on Europe, and particularly on the UK, acountry with a relatively good record of corporate governance and corporate socialresponsibility. Her eyes are on J Sainsbury plc, a leading UK food retailer, which hasrecently been the target of unsuccessful takeover bids. Although Sainsbury’s share priceincreased sharply in 2007 amid takeover talks, it plummeted months later when noagreement was reached and further tumbled during the credit crisis. Further speculation that the firm may be acquired has led to more share price fluctuations in 2009.
The CEO believes that J Sainsbury is a risky investment given the economic outlook for theUK and the fierce competition in the industry but certainly good value for money and a goodmatch for her company that has particular skills and capabilities. These can be used toenhance the target’s value through boosting its sales’ growth by a further (over and abovethe forecasted growth for the standalone company) 3% in 2011 and 1% for each of the next3 years. Of course there is always uncertainty associated with such forecasts, particularlygiven the ambiguity of economic forecasts during the recovery. A relatively safe prediction isthat your company can contribute reducing the target’s predicted cost of sales/sales ratio by1% and its administrative costs/sales ratio by about 20%, starting in 2011. The CEO alsofeels that if J Sainsbury plc is currently to some extent undervalued then its shareholdersmay be reluctant in selling their shares unless they are ‘dazzled’ by the offer and thecorresponding premium.
The CEO asks you to produce a detailed report to be presented to the next meeting of theBoard of Directors advising whether your company should formally consider bidding for JSainsbury. She reminds you that two of the non-executive directors are top professors offinance and are always very critical of decisions not reflecting the latest academic thinkingand other empirical evidence/analysis.
Requirement
You are required to write a report for consideration at the next meeting of the Board ofDirectors. The aim of your report is to make clear and well-argued recommendations supported by relevant academic literature and other evidence. Your report should be structured into the following sections:1. Motives – This section should include a detailed discussion of the main motives for the proposed acquisition supported by the latest academic literature and advances within the industry, with an emphasis on the arguments that the company should use to present such a bid to its shareholders. [20 marks]2. Valuation - You need to advise the company about Sainsbury’s valuation and whether it can offer the company value for money. Clearly demonstrate calculations, assumptions and scenarios. As part of your answer, you also need to draw the Board’s attention to any benefits, risks or problems associated with your chosen methods of valuation. [40 marks]3. Financing – This section should include a critical evaluation of the various alternatives of financing this bid and the potential effects of using each of these alternatives in this case. [25 marks]4. Recommendations – This should include a clear and concise list of recommendations supported by appropriate arguments based on the previous analysis in the report, and could also include any other relevant information that you deem to be useful for the Board to consider. [15 marks]N.B.:(i) All calculations must be fully explained and based on the most recent availableinformation. You are advised to visit Sainsbury’s website, where you can find thecompany’s Annual Report in addition to other relevant information.3(ii) All arguments must be critically evaluated on the basis of the latest academic literature and anecdotal evidence. The use of literature must be fully referenced and a reference list must be provided at the end of the assignment.This is an individual assignmentOverall word limit, 3000 words maximum (excluding tables/figures)Assignment Weight: 80% of the total final assessment mark
YOUR COMPLETED ASSIGNMENT MUST BE SUBMITTED NO LATER THAN 15:00 ON FRIDAY 30 APRIL 2010
Assignments must be typed or word-processed on A4 paper using 1.5 or double spacing and with margins of 2-3 cm. Pages should be numbered and stapled together in the top left hand corner. The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices.PLAGIARISM and COLLUSIONStudents suspected of plagiarism, either of published work or work from unpublishedsources, including the work of other students, or of collusion will be dealt with according to University guidelines.You will be also required to submit an electronic copy of your assignment which will be put through the plagiarism detection service.
Corporate Finance Assignment GuidelinesThe following are some specific guidelines for the Corporate Finance assignmentonly.
Overall markers look for a clear structure, logic and internal consistency. You needto read the requirements of the assignment very carefully and ensure that youranalysis is well focused on the main relevant issues.This assignment has been designed to be a learning tool. It is complex and there arenot ‘right’ or ‘wrong’ answers to it. Two of you could come to different conclusionsand both be ‘correct’. It all depends on the rationale and explanations that you givefor reaching your recommendations, and how they relate, and are strengthen by, thecurrent academic thinking (see below for use of literature). Although the assignmentrefers specifically to financial management, you may also need to give marginalconsideration to issues that are not strictly ‘financial’ issues, since the company’slong-term strategy is informed by several managerial functions.
J Sainsbury plc is a real company and to fulfil the requirements of your assignmentyou should use the latest available information on the company. The company’s website is full of relevant information, including the latest Annual Reports. Financialinformation on the company can also be obtained from Reuters.
On the contrary, ‘your’ company is fictional and the assignment gives you remarkablylittle information on it. This is because you should concentrate on Sainsbury. Inaddition, if you had full information on your company, the assignment would becometoo complex and long. If you wish, you can make some additional assumptions onyour company, but if you do, please state them clearly.
The use of literature and referencing is one of the main weaknesses encounteredin the work of past cohorts. Your analysis needs to be embedded into the relevanttheory and empirical evidence. Although this is a report, you would notice that youare required to ensure that your arguments reflect the “latest academic thinking!”Therefore, relevant recent references need to be discerningly used to support andstrengthen your arguments. It is not a competition to maximise the number ofreferences, but markers will look for the appropriateness and quality of thereferences and evidence of wider reading, beyond the module reading list. You mustinclude a list of references at the end of your assignment, not a bibliography. In otherwords, the reference list must include only sources referred to in the text of yourassignment, and must comply with the style specified in your Programme Handbook.This requirement relates to the Marking Descriptors that require your work to be wellresearched and findings fully evaluated. Your assignment needs to provide evidenceof well-developed analytical skills and satisfy the marking descriptors. To give youjust some examples, you are expected to:(i) demonstrate awareness of the relevant literature by explicitly refer to theliterature;(ii) show that you researched your work well by referencing your sources ofinformation;(iii) fully evaluate findings and conclusions by comparing your findings withrelated studies found in the literature.In the Motives section you are required to include “a detailed discussion of the mainmotives”. The motives need to be critically assessed and again reflect “the latestacademic thinking” and industry advances (look for news and other anecdotalevidence). The discussed motives need to be appropriate to “the proposedacquisition”, and the emphasis is “on the arguments … to present such a bid to itsshareholders”. To simply discuss a number of merger motives without much attemptto relate them to the proposed acquisition fails to answer the question. Again, it isnot a competition to include as many motives as possible, but markers will look forthe relevance of the motives to the particular case and the strength of the argumentused to relate them to the case. Of course, most relevant motives should beincluded!#p#分页标题#e#
With respect to the Valuation, please remember that this is only part of yourassignment and the report that you are writing is only an initial report for the Board todecide whether the company should investigate this acquisition further. It is not thefinal valuation! However, you are required to give an initial recommendation whetherSainsbury is good value for money. So, you are expected to use market andaccounting information to come to an informed recommendation. The accuracy ofthe calculations is of course important, but not as important as you think, andcertainly not enough. To the mere numbers you need to associate critical analysis inorder to “advise the company” and “draw the Board’s attention to any risks orproblems associated with your chosen methods of valuation”. You also need tojustify your choice of valuation methods for this particular acquisition, again possiblysupporting your choice by referring to appropriate literature, and drawing attention tothe limitations and risks associated with them. You need to justify your assumptions,and the source of the figures used in the valuation should be clearly indicated.Finally, you should assess the findings in the light of the limitation of the model used.Some sensitivity analysis would strengthen your case.
In the section on Financing, you should use your knowledge of the debate on capitalstructure and distribution policy to inform your choice of financing alternatives.Identifying the alternatives is only the first step towards assessing their implicationsfor other financial decisions, which in turn may affect company’s value. Once againthere is plenty of opportunities in this section to use references to both the capitalstructure and distribution policy debates, as well as the issue of how the financing oftakeovers may affect their success.
Finally, the Recommendations must be based on the analysis of the previous threesections. Be careful not to turn this part into a general conclusion without properrecommendations. ‘Sitting on the fence’ may be comfortable, but not very useful.Your Board would want you to show conviction in your recommendations!In conclusion:• Read the assignment very carefully and identify the exact requirements.• Research the relevant issues thoroughly before embarking on the assignment.Textbooks are key reading but not enough at this level.• Use references appropriately to support and substantiate your analysis, as well asdemonstrate that your knowledge of the literature is appropriate for this level.• Ensure that the information used is up-to-date and acknowledge the source of anymaterial, such as tables and figures, included in your assignment.
In addition to the above, here are some general marking descriptors that will betaken into account when marking the assignment:• Relevance to question Relevance of answers to this particular M&A (asopposed to general claims and literature)• Structure/presentation & clarity of writing coherent writing, clear and goodpresentation of explanations/calculations/tables etc• Scope and relevance of literature/supporting evidenceEffective sources/evidence used and how they are used to support arguments/assumptions• Rigour of argument Critical Evaluation/Creativity• Evidence of understandingExtent of in-depth understanding
|
