Mergers and Acquisition
(Deadline, 5.00pm Friday 18 May 2018)
Your team has been asked to prepare a pitch for the board of directors of Crown Resorts Ltd (ASX: CWN) about a possible acquisition of Mantra Group Ltd (ASX: MTR).
Your job is to prepare a presentation (PowerPoint or similar) containing:
1. A presentation of Mantra Group
2. An outlook for the industry
3. The valuation of Mantra Group
4. The proposed structure of the deal (financings and offer structure)
5. A consolidation analysis
Your deliverable will be a PDF file with your presentation and an Excel spreadsheet with your valuation models.
2 Valuation Model
Your valuation should contain a “football field analysis” containing valuations from CCA and DCF. CTA is not required but, if provided, may grant an additional 3 marks (the maximum mark of the assignment is still capped at 30).
For CCA you should use at least 6-8 comparable companies divided in two groups based on some relevant characteristic. If you cannot find forecasts on the future performance of the comparables you can limit your analysis to the LTM multiples.
For DCF you should provide at least 4 scenarios (a baseline with synergies, a baseline without synergies, an optimistic and a pessimistic scenario). Your inclusion of synergies in the DCF should be based on a detailed rationale and quantification contained in the presentation.
Your presentation should contain one slide with your most relevant assumptions (for example your “exit multiple” or the expected growth rate of the business, etc.) while all the other assumptions should be available in the Excel file.
You do not have to use the Excel file designed according to the examples in the book. If you want you are welcome to create your own simplified versions. The important thing is that your file should contain your valuation (With all the formulas! We need to be able to understand the calculations that you made to reach a certain conclusion).
3 Deal Structure
You should propose at least two different deal structures, one involving only payment with Cash
(financing by balance sheet excess cash and/or debt), and the other involving payment in stock (for at least 25% of the transaction value) as well as a rationale for which of the two structures you prefer and why. The full or partial stock deal should include a proposed exchange ratio.
4 Consolidation Analysis
Your consolidation analysis should include:
? A detailed accretion/dilution analysis incorporating the proposed financing and offer structure
? An analysis of the key credit metrics of the merged entity’s consolidated financing facilities
? Size - the likely shares on issue and market cap of the merged entity
? Other consolidation ratios as appropriate (eg. consolidated margins, revenue growth, operating cost/net income etc.)
Financial data on the two companies can be found in Morningstar DatAnalysis Premium, available from the website of the UTS Library (See this short video on how to access and download the data).
Two reports on the hospitality industry in Australia are provided with the assignment. You are welcome to look for additional information.
If you are interested in finding comparable transactions, this short video shows where to find some information.
An Example of a Pitch book will be provided with the assignment. You are not required to follow the same structure. This example is just to give you an idea of the type of content in this type of presentation..
The assignment is worth 30 marks. The marks will be assigned for:
A presentation of Mantra Group 3
An outlook of the industry 3
The valuation of Mantra Group 10
The proposed structure of the deal 5
The Consolidation analysis 5
Quality of the presentation 4
You are not required to find the “correct answer”, but rather to build a compelling narrative of why the acquisition would be attractive and why a certain acquisition price would be appropriate. You will be judged on the soundness of your reasoning and the quality of your assumptions.
The final 4 marks will be awarded for the quality of the presentation. Although we do not require professional editing, your pitch book should still look and feel of professional quality. You will be penalized for excessive typos and spelling mistakes, for shoddy cut-and-paste work, sloppy graphs, etc. You will be especially penalized if your work looks like a collection different documents with different visual styles.
Every member of the group is responsible for the entire assignment and will receive the same mark (unless different provisions have been made in your group contract).
I expect conflicts between group members to be resolved according to the provisions in your group contract.
You must deliver your Pitch Book electronically in UTS Online (you will find an electronic drop box in UTS Online / Group Assignment). Paper copy is not required.
There is no formal requirement on the length of your presentation but from the example posted you will see that this type of document usually has between 30 and 50 slides including appendices. Include between 20 and 30 slides in the body (for example 30 slides in the body and 20 in appendices or 25/25 or 20/20 would be a suitable structure).
Your pdf file should be named Assignment1_Group_XXX.pdf, where XXX is your official group number from UTS Online.
Your Excel file should be named Assignment1_Group_XXX.xlsx, where XXX is your official group number from UTS Online.
Files with the wrong name will attract a 1 mark penalty.