Mergers & Acquisitions
BPP Coursework Cover Sheet
Use the table below as your cover sheet for the 1st page of the submission. The sheet should be before the cover/title page of your submission.
Programme BSc Business management w/streams
Module name Mergers & Acquisitions
QAA Level 5
Schedule Term
Student Reference Number (SRN)
Declaration of Original Work:
I hereby declare that I have read and understood BPP’s regulations on plagiarism and that this is my original work, researched, undertaken, completed and submitted in accordance with the requirements of BPP Business School.
The word count, excluding contents table, bibliography and appendices, is ___ words.
By submitting this coursework you agree to all rules and regulations of BPP regarding assessments and awards for programmes. Please note, submission is your declaration you are fit to sit.
BPP University reserves the right to use all submitted work for educational purposes and may request that work be published for a wider audience.
BPP Business School
BSc Business Management with Streams
Mergers and Acquisitions
1. General Assessment Guidance
• Your summative assessment for Mergers and Acquisitions is a Coursework submission.
• The deadline for submission is 23.59 PM on 16th August 2016
• You are required to submit your assessment via Turnitin online access. Only submissions made via the specified mode will be accepted and hard copies or any other digital form of submissions (like via email or pen drive etc.) will not be accepted.
• For coursework, the submission word limit is 2,500 words. You must comply with the word count guidelines. You may submit LESS than 2500 words but not more. Tables, diagrams, bibliography, appendices, annex and headings are NOT included within word count calculations. You must specify total word count on the front page of your report.
• For coursework, please use font size 12 for body text and the typeface (font) should be Arial or Times New Roman with minimum 1.5 spacing.
• For headers and titles, please use font size 14. Your submission must have standard margins and page numbers.
• Please use English (UK) as your language in the submission.
• Do not put your name or contact details anywhere on your submission. You should only put your student identification number (SRN) which will ensure your submission is recognised in the marking process.
• A total of 100 marks are available for this module assessment and you are required to achieve minimum 40% to pass this module.
• You are required to use only Harvard Referencing System in your submission. Any content which is already published by other author(s) and is not referenced will be considered as a case of plagiarism.
You can find further information on Harvard Referencing in the online library on the VLE. You can use the following link to access this information:
http://my.bpp.com/vle/mod/data/view.php?d=223&rid=596
• BPP University has a strict policy regarding plagiarism and in proven instances of plagiarism or collusion, severe punishment will be imposed on offenders. You are advised to read the rules and regulations regarding plagiarism and collusion in the GAR and MOPP which are available on VLE in the Academic registry section.
• You should include a completed copy of the Assignment Cover sheet. Any submission without this completed Assignment Cover sheet will be considered invalid and not marked.
2. Assessment Brief
The assignment comprises two sections. Please answer both sections.
Your submission must be in WORD format and NOT PDF.
Part A
Case Study
You are the investment director of Burns, Blisters and Pimples plc (BBP), a company in the property investment sector. Your latest accounts are shown in Appendix One. BBP is a quoted company, with 100m shares in issue currently trading at £3.0145.
The company wishes to grow both organically and by acquisition. You have identified a possible target company, Kamor Investments Ltd. Kamor is a privately owned property company, mainly investing in town centre shops. Kamor’s latest accounts are shown in Appendix Two.
You have had an initial conversation with the managing director. Your meeting notes are shown in Appendix Three.
1. You are required to produce an offer letter from BPP to Kamor. The offer letter should include the following:
a. You should state an offer amount (marks in part 2)
b. You should state, in letter form, any terms and conditions you wish to include to deal with matters of uncertainty. Note in this part you should simply include the offer letter, outlining your terms (in other words, what you would like the target to see). In part 3, below, you will be asked to justify your approach.
(5 marks)
2. In this part show your workings (with explanations) to support your offer amount. You are expected to produce a range of valuations , drawn on methods used in the module. You should then state and explain which amount you are offering. ([net asset basis ,multiples and discounted dividend methods)
Calculation 15 marks
Discussion 15 marks
3. You should provide an explanation of the key items in your offer document. For example you should explain how you have dealt with areas of uncertainty and why you have taken that approach (20 marks).
Part B
4. You are required to research the acquisition of Digital Gurus by the firm, Rethink.
a. Please provide an analysis for the market that Rethink operates in, using a Porter’s Five Forces approach. Your answer should include a short statement describing the market being analysed. (20 marks) (Diagrams could be good)
b. Discuss what you believe are Rethink’s strategic objectives in acquiring Digital Gurus. In other words, explain why you believe buying Digital Guru contributes to Rethink’s strategy. Your answer should include examples to illustrate points being made. Marks will not be awarded for points that are generic. Instead the points and illustrations you provide should be specific to this transaction. (25 marks)
Appendix One
BPP plc Latest Accounts
Income statement £M 2016 2015 Balance Sheet 2016 2015
Rent Revenue 39.25 36.81 Investment Properties 785.00 775.00
Surplus on valuation 32.00 25.00
71.25 61.81 Receivables 0.77 0.65
Operating Costs 8.00 7.50 Cash 12.25 8.43
Operating Profit 63.25 54.31 Current Assets 13.02 9.08
Interest 31.50 28.04
Profit Before Tax 31.75 26.27 Trade Payables 0.25 0.10
Tax 6.35 5.25 Borrowings 5.00 8.00
Net Profit 25.40 21.02
Current Liabilities 5.25 8.10
Net Current Assets 7.77 0.98
Borrowings 520.00 510.00
Net Assets 272.77 265.98
Share Capital 100.00 100.00
Retained Profits 172.77 165.98
Shareholder’s Equity 272.77 265.98
Appendix Two
Kamor Ltd Latest Accounts
Income statement £M 2016 2015 Balance Sheet 2016 2015
Rent Revenue 5.02 4.35 Investment Properties 83.60 79.10
Surplus on valuation 2.00 1.34
7.02 5.69 Receivables 0.19 0.12
Operating Costs 1.26 1.11 Cash 8.00 3.00
Operating Profit 5.76 4.58 Current Assets 8.19 3.12
Interest 3.72 3.30
Profit Before Tax 2.04 1.28 Trade Payables 0.05 0.05
Tax 0.41 0.26 Borrowings 2.00 –
Net Profit 1.63 1.02
Current Liabilities 2.05 0.05
Net Current Assets 6.14 3.07
Borrowings 60.00 55.00
Net Assets 29.74 27.17
Share Capital 5.00 5.00
Retained Profits 24.74 22.17
Shareholder’s Equity 29.74 22.17
Appendix Three
Notes of meeting with Managing Director Kamor Ltd, Marcus Delboy (MD).
1. The company is 100% owned by MD and his family.
2. MD’s salary from the business is £50,000. MD’s children, Ricky and Martina both work in the company as directors and also earn £50,000 each. MD would like them to keep their jobs. You have met them and they are not very talented.
3. The dividend history of the firm has been (in total terms, £M):
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
£1.5M 1.45 1.40 1.37 1.35 1.325 1.30 1.275 1.265 1.25
4. A number of the leases are coming up for rent reviews in the next two years. Delboy estimates that rent rises will be about 5% (that is, revenues should rise by about 5%).
5. The company’s cost base is fixed. So the only likely rises are inflationary and then mostly on salaries. Salaries are 80% of the company’s operating costs.
6. Kamor are very excited about a development that they own. They have applied for planning permission to build a large shopping centre in Swindon. They will get the result of the planning application in about 9 months’ time. If they are successful then they will build the centre and then immediately sell it. Allowing time for building etc, this will result in a profit of about £15m , arising in 6 years’ time.
7. The last two years of tax computations have yet to be agreed with HMRC. Kamor claim that the figures in the accounts are usually accepted. However you have heard that HMRC often agree figures around 10% higher than those put through the accounts.
8. The company is being sued. Some of the tenants are claiming that they have been overcharged on their service charges going back a number of years. Kamor’s lawyers have produced a document which states that in their opinion the claim, for £5m in back payments, has about a 50% chance of being allowed by the courts.
9. Neither company has any depreciation or amortisation.
10. BPP’s equity beta is currently 0.9. The historic returns on the markets are as follows:
% per annum
Last year 2%
Last five years 8%
Last ten years 9%
Last twenty years 6%
Gilt yields are currently:
Overnight 0.2%
7 days 0.27%
One year 1.34%
Five years 2.26%
Ten years 2.83%
Twenty years 3.00%
This is a group assignment. Your grade for this module will be 100% from this
group assignment.
The assignment should be a Word format document.
There should be only one submission per group. Group assignments can be found on the VLE in the coursework folder. You should also include each member’s SRN in the report. If you have not been assigned to a group you should contact your tutor immediately and no later than 5th November 2015.
All submissions should be made in the format of Word documents.
You should only work with members of your assigned team. You should also familiarise yourself with the University plagiarism policy.
Mergers & Acquisitions ASSESSMENT
2.1. Assessment Marking Scheme
The assignment is marked out of 100. The following table shows the mark allocation and the approach required.
Section Marks Advice
A 55% You need to value the company using methods discussed on the module. You will need to decide which numbers to use for the valuation; not necessarily the latest accounts, for example. You should produce an offer letter, written in a style that you would expect to see in practice (well written, grammatically correct, professional, for example). Then in the later parts you need to explain the approach that you have taken in for the amount and the terms.
B 45% Having analysed the market you will then need to figure out why Rethink is buying Digital Gurus – what specific benefits might accrue to Rethink? No marks will be awarded here for simply listing points from the text book – you need to apply your knowledge to this particular transaction.
