Template for M&A assignment

The project must cover points mentioned below. You are at liberty to augment this to include
material that you deem relevant and significant.

A. ECONOMIC SETTING OF THE BUYER’S INDUSTRY

 Important characteristics of the industry.

 Challenges faced by the industry over the 5 years prior to the transaction.
 Industry trends, prior to the transaction.
 Outlook for the industry over next 5-10 years at of time of transaction.

B. BUSINESS ECONOMICS REASONS FOR THE TRANSACTION

 Reasons provided by Buyer and Seller stated in Sebi/SEC other statutory institutions
and company documents, filings, annual report, and announcement of the transaction.
 Reasons stated in financial press.

C. STRATEGY

 How did this particular transaction fit into the broad strategy of the acquiring firm? The
selling firm?
 Was the acquisition related or unrelated to buyer’s operations at time of deal? Discuss
whether the buyer has invested in this industry before.
 If related, explain how they are related?
 If unrelated, did this appear to occur because growth opportunities for the industry as a
whole were not favorable or were opportunities lacking just for the individual firm
studied?

D. TERMS OF THE TRANSACTION

 Describe deal structure at time of announcement.

 How large a premium was offered to the target?
 How the deal was financed?

E. INITIAL REACTION TO DEAL

 Stock market reaction (sharp rises or declines in equity prices upon announcement of
the deal require additional discussion).
 Security analyst reaction.
 Financial press (WSJ, Business Week, Forbes, Economic Times, Financial Express
etc.) reaction.

F. VALUE CREATION

 How did buyer expect to create value?

 Describes sources of value creation.

G. COMPARISON TO OTHER ACQUISITIONS OF BUYER

  How did this acquisition compare to others, if any, made by buyer in previous 5 years
with respect to size and premium paid?
 Does this acquisition break the strategic pattern of usual transactions by the buyer?

H. COMPARISON TO OTHER ACQUISITIONS MADE BY MAJOR

COMPETITORS

 Select two or three key competitors of buyer and compare the recent acquisition
program (last 3-5 years) of these companies to that of the buyer.
 Is the role of acquisitions (size and type) similar for each of the 2 or 3 major firms
studied?
 Do the competitors rely more on internal growth? If not, discuss any differences.

I. IMPACT OF ANNOUNCED ACQUISITION ON BUYER’S FINANCIAL

STATEMENTS

 Based on the announced deal, what effect would consummation have on buyer’s debt
ratios, credit ratings and earnings?

J. IMPACT OF ACQUISITION ON INDUSTRY STRUCTURE

 Was the buyer’s announcement preceded by other large acquisitions in the same
industry?
 If your answer to 1 above is yes, what influence do you think the prior acquisitions had
on the decision for the buyer to announce this deal?
 Was the buyer’s announcement followed by other large acquisitions in the same
industry? List these acquisitions and whether you believe they were motivated or a
result of the buyer’s acquisition under study.
 Do you believe the acquisition under study will cause more acquisitions in the buyer’s
industry? Why?
 What impact do you believe the acquisition under study will have on the buyer’s market
share? On buyer’s competitive advantage? On growth? On profitability?

K. DEAL HISTORY

 What was the length of discussions between buyer and seller?

 Describe offers and counter-offers and changes in deal terms.
 Describe other bidders (if any).
 Describe defensive measures employed by seller either before or after the deal
announcement.
 Describe proxy fights, court battles, if any.
 Describe any deals made with regulatory authorities to gain approval of deal.
 As of the date of this report was the deal closed, busted-up by a third-party buyer,
cancelled or still pending?
 If the deal was cancelled, discuss the reasons.
 If the deal is still pending, discuss whether the acquisition is taking longer to complete
than original anticipated, and if so, why.
  If the deal was busted-up by a third-party buyer, discuss how this occurred. Was the
buyer compensated by a termination fee? Was action by the third-party buyer
foreseeable?

L. SUBSEQUENT PERFORMANCE AND APPRAISAL (ASSUMING DEAL

CLOSED)

 Initial changes after the transaction due to acquisition (e.g., layoffs, divestitures,
changes in seller’s management).
 Measure the performance of the buyer and the selected 2-3 key competitors by:

a. Total return to shareholders over past 4 years/or the time applicable.

b. Return on equity over this time frame.
c. Compare (a) and (b) above to benchmarks such as industry total return and return
on equity.

 Has the buyer firm performed well for its shareholders over this time frame?
 Does there appear to be any differences between the performance of the buyer and the
two or three key competitors selected? Does this difference appear to be attributable to
the degree the firm relied on external growth?
 With the benefit of hindsight, did the buyer make mistakes with its major strategies and
investment thrusts (both internal and external)?

M. LOOKING AHEAD

 Has the buyer positioned itself wisely in relation to its industry for future value
creation? Discuss your reasoning.
 What are some major changes in strategic direction the buyer firm could make to
improve its current performance and prospects?
 What must buyer still do to make this acquisition successful?

N. DRAWING SOME CONCLUSIONS

 Which of the companies studied (buyer and 2-3 key competitors) seemed to have
followed the best strategy and execution?
 Does one company appear to be consistently better than the others?
 What is the source of its superiority?
 If you were the buyer’s CEO, would you have done anything differently? Explain.
 Do you think the buyer will create value on this acquisition? Why or why not?

The paper should be in a proper format with references. Any paper without references
will not be evaluated. The upper limit is 15000 words.
Reference M&A:

1. SABMiller acquisition by ABInBev

2. ING Vysya acqisition by Kotak Mahindra Bank
3. Vedanta and Cairn India merger
4. Sun Pharma’s acquisition of Ranbaxy Laboratories
5. Dow Chemicals & DuPont Merger