Questions and Topics We Can Help to Answer
Paper Instructions;
Acquisition Project:
You are hired by a specific acquiring company whose business strategy involves an acquisition or merger. In our case, the acquirer is:
AMAZON
The potential target company is:
Whole Food
Project: build a business case and a financial case for (or against) the acquisition of the target (see above) by the acquirer (see above).
The Report should include the key objectives, why an acquisition is (or is not) preferable to alternative options such as a “go it alone” venture or alliance, the amount and composition of the initial offer price, how it will be financed, and key risks associated with the transaction.
The Report should have the COMPONENTS below, and may include some other elements, depending on what is necessary to make your project to be convincing to the acquirer:
Business Plan (for acquiring firm)
1. BUSINESS MISSION/VISION STATEMENT: DESCRIBE WHAT INDUSTRY/MARKET NEEDS ARE TO BE SATISFIED, WHO THE TARGETED CUSTOMERS ARE, AND WHAT RESOURCES OR CAPABILITIES WILL BE USED TO SATISFY THESE TARGETED CUSTOMER NEEDS.
Acquisition Plan (developed by acquiring firm)
2. PLAN OBJECTIVES OF THE ACQUIRING FIRM: IDENTIFY THE SPECIFIC PURPOSE OF THE ACQUISITION. THIS SHOULD INCLUDE WHAT SPECIFIC GOALS ARE TO BE ACHIEVED (E.G., COST REDUCTION, ACCESS TO NEW CUSTOMERS, DISTRIBUTION CHANNELS OR PROPRIETARY TECHNOLOGY, EXPANDED PRODUCTION CAPACITY, ETC.) AND HOW THE ACHIEVEMENT OF THESE GOALS WILL BETTER ENABLE THE ACQUIRING FIRM TO IMPLEMENT ITS BUSINESS STRATEGY.
3. PURCHASE (OFFER) PRICE ESTIMATE: PROVIDE PROJECTED FIVE-YEAR INCOME, BALANCE SHEET, AND CASH FLOW STATEMENTS FOR THE TARGET FIRM AND FOR THE CONSOLIDATED ACQUIRER AND TARGET FIRMS. DEVELOP A PRELIMINARY MINIMUM AND MAXIMUM PURCHASE PRICE RANGE FOR THE TARGET. SPECIFY POTENTIAL SOURCES OF AND DESTROYERS OF VALUE. LIST KEY FORECAST ASSUMPTIONS. IDENTIFY AN INITIAL OFFER PRICE, THE COMPOSITION (I.E., CASH, STOCK, DEBT, OR SOME COMBINATION) OF THE OFFER PRICE, AND WHY YOU BELIEVE THIS PRICE IS APPROPRIATE IN TERMS OF MEETING THE PRIMARY NEEDS OF BOTH TARGET AND ACQUIRER SHAREHOLDERS. THE APPROPRIATENESS OF THE OFFER PRICE SHOULD REFLECT YOUR PRELIMINARY THINKING ABOUT THE DEAL STRUCTURE.
4. FINANCING PLAN: USING THE COMBINED/CONSOLIDATED FINANCIAL STATEMENTS, DETERMINE IF THE PROPOSED OFFER PRICE CAN BE FINANCED WITHOUT ENDANGERING THE COMBINED FIRM’S CREDIT WORTHINESS OR SERIOUSLY ERODING NEAR-TERM PROFITABILITY AND CASH FLOW.
5. KEY RISKS ASSOCIATED WITH THE TRANSACTION.
Papers should appear to be professionally done and suitable for submission to a senior corporate executive, a lender, or private equity investor.
