Reference no: EM132534839 , Length: word count:2000
COURSEWORK - ELEMENT 011 VALUATION OF TARGET COMPANIES
MERGER AND ACQUISITION :-
The task: You need to discuss first the use (pros and cons) PUT THEM IN TAPLES 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;
3 )-
• 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- ells, 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.
your own preferred methods based on your literature study, by all mean, use them. Your work will be assessed using the following criteria:
In this assignment you have to choose (2 acquirer companies ) each one has a different sector , and (2 target companies ) both have the same sector from the Europe market or USA market . apparently you can use (FAME or/ OSIRIS ) FOR EUROPE DATA and/ www.sec.gov (SEC WEBSITE FOR AMERICAN COMPANIES)
FOR THE METHOD THAT YOU HAVE TO USE : DISCOUNTED CASH FLOW MODEL / P/E RATIO
YOU HAVE TO USE ONE METHOD OF THOSE FOR EACH TWO COMPANIES ( 1 ACQUIRER TO 1 TARGET )
PREFER USING UNITED STATES COMPANIES .
CRITERIA
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
(ii) High quality references, proper reference list following ARU Harvard Referencing Guide and correct in-text citations
(iii) Rationale for your valuation methods 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.
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. 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.
Attachment:- Valuation Of Target Companies.rar