Historical Financial and Market Performance BANK3000 Assessment

Assignment :

Assessment 1 Part 2

Marks:

Case

Student No.

Tutorial details

Below expectations (0 49%)

Meets expectations (50 69%)

Exceeds expectations (70 100%)

Comments

1. Overview of the historical

financial performance of the target firm and bidder

20 marks

1.1. Illustrate and explain the target firms and bidders pre- merger accounting performance (e.g. ROA, ROE, EPS, and

Leverage ratio). (5 marks)

Incomplete or incorrect calculation working of the ratios.

Identified Less than 4 accounting ratios No time series analysis

Do not provide evidence on the causes of the changes

Most of the calculation working was correct for the ratios

Identify 4 accounting ratios Have time series analysis

Provide an analysis of the difference in analysis over the years

Provide evidence on the causes of the changes

All calculation working was correct for the ratios

Identify 4 accounting ratios

Have clear and detailed time series analysis

Provide an analysis of the difference in analysis over the years

Provide strong and clear evidence on the causes of the changes

1.2. Illustrate and explain the target firms and acquirers pre- merger market performance (e.g. historical stock price, PE ratio, and market capitalization). (5 marks)

Incomplete or incorrect calculation working of the ratios.

Identified Less than 3 market performance indicators

No time series analysis

Do not provide evidence on the causes of the changes

Most of the calculation working was correct for the ratios

Identify 3 market performance indicators Have time series analysis

Provide an analysis of the difference in analysis over the years

Provide evidence on the causes of the changes

All calculation working was correct for the ratios

Identified 3 market performance indicators

Have clear and detailed time series analysis

Provided an analysis of the difference in analysis over the years

Provided strong and clear evidence on the causes of the changes

1.3. Compared to their industry peers or market performance, are a bidder and target firm under- performed or over-performed? Explain. (5 marks)

Do not discuss how the peer/peers are chosen

Stated the ratios without any comparison Do not discuss the variations in both accounting and market performance between the target firm and its peers and between the acquirer and its peers

Do not provide evidence on the causes of

Discuss how the peer/peers are chosen Make a comparison of both accounting and market performance

Discuss the variations in both accounting and market performance between the target firm and its peers and between the acquirer and its peers

Provide evidence on the causes of the

Discuss how the peer/peers are chosen

Make a comparison of both accounting and market performance Discuss the variations in both accounting and market performance

between the target firm and its peers and between the acquirer and its

the variations

Do not provide conclusion and evidence on target and acquirer performance

variations

Provide a conclusion and evidence on target and acquirer performance

peers

Provide evidence on the causes of the variations and discuss what it means for the target firm and acquirer Provide a clear conclusion and strong

evidence on target and acquirer performance

1.4. Explain if the bidders and targets pre-deal performance affect the M&A decision. (5 marks)

Did not provide any or little discussion on how bidder's and target's pre-deal performance affects the M&A decision The discussions are not aligned with evidence found in previous sections

Provide discussions on how bidder's and target's pre-deal performance affects the M&A decision

Justify why the M&A decision is made Using evidence founded in previous sections to support the discussions

Provide clear discussions on how bidder's and target's pre-deal performance affects the M&A decision

Provide a clear discussion on the justification on why the M&A decision is made

Building clear connections with evidence founded in previous

sections and using the evidence to support the discussions

2. Valuation of merger

60 marks

2.1. Estimate the target firms value by using the

(a) Cash flow valuation method and (15 marks)

(b) Relative valuation method. (15 marks)

Show all your assumptions, workings and explain.

Do not use both valuation methods and the calculations are incomplete or incorrect

Do not show assumptions made and workings

Do not have discussions on the findings

Use both valuation methods and most of the calculations are complete or correct Show most assumptions made and key workings

The assumptions made are reasonable and correct

Have discussions on the findings

Use both valuation methods and the calculations are complete or correct clearly show all assumptions made and all necessary workings

The assumptions made are clear and correct and discuss the reasons Have clear discussions on the findings

2.2. What is the fair value for your target firm based on your findings? Is the target firm

undervalued or overvalued? Explain. (5 marks)

The calculations are incorrect

Do not make any conclusions on the target firm's value or the conclusions are inconsistent

Most of the calculations are correct Discuss whether the target firm is undervalued or overvalued

Provide evidence to support this conclusion

Calculations are correct

Clearly discuss whether the target firm is undervalued or overvalued

Provide strong and clear evidence to support this conclusion

2.3. Comparing your estimated value of the target with the offer price, is the target firm over- paid? (5 marks)

Do not provide any comparison Discussion is incomplete and incorrect No evidence to support the discussion

Provide comparison

Identify whether the target firm is over- paid

Discuss why the target is over-paid or under-paid

Provide evidence to support the discussion

Provide a clear comparison between the offer price and estimated value of the target firm

Identify whether the target firm is over-paid

Discuss clearly why the target is over-paid or under-paid

Using evidence found in the previous section to support your arguments

2.4. Calculate the bidders Cumulative Abnormal Return (CAR) around the M&A announcement for the bidder.

Show all your workings and explain. (10 marks)

Do not show CAR or incorrectly No workings provided

Most calculations are correct and workings are clear

Explanations are consistent with your findings

The model and all calculations are correct Explain workings in detail and discussions are clear Explanations are consistent with your findings

2.5. Graph the bidders return around the announcement, does the stock price movement

support the efficient market hypothesis? Explain. (5 marks)

Do not show a graph of bidder's return Not discuss the efficient market hypothesis

Show the graph of bidder's return Discuss efficient market hypothesis Most of the discussions are correct

Show the graph of bidder's return Have a clear discussion on the efficient market hypothesis

The discussions are correct and are supported by your findings

2.6. How is the M&A financed? What are the impacts of the financing strategy on the bidders shareholder and future performance? (5 marks)

Do not discuss financing strategies No clear discussion on its impact

Discuss main financing strategies Discuss its main impact on bidder's shareholders or performance Provide some evidence

Discuss main financing strategies, including financing instruments used Have a detailed and clear discussion on its impact on bidder's shareholders and performance

Provide clear and strong evidence

3. Post-acquisition performance

20 marks

3.1. What are the changes in the bidders accounting and market performance after the acquisition? (10 marks)

Incomplete or incorrect calculation working of the ratios.

Identify Less than 4 accounting ratios No time series analysis

Do not provide evidence on the causes of the changes

Most of the calculation working was correct for the ratios

Identify 4 accounting ratios and 3 market performance indicators

Have time series analysis and cross- sectional analysis

Provide evidence on the causes of the changes

All calculation working was correct for the ratios

Identify 4 accounting ratios and 3 market performance indicator Have clear and detailed time series

analysis and cross-sectional analysis Provide strong and clear evidence on the causes of the changes

3.2. What is the impact of the deal on the bidders market value? Do the bidders shareholders benefit from the deal? Explain. (10 marks)

Have no discussion or the discussions are inconsistent with findings in previous sections

Discuss the impact of the deal on the bidder's market value

Provide some justifications on how the deal influences the bidder's market value Show evidence to support your arguments

Clearly discuss the impact of the deal on the bidder's market value

Provide some justifications on how and why the deal influences the bidder's market value

Show evidence to support your arguments

Discuss and explain whether your findings support the observed market performance of the bidder