A Systematic Examination of ‘Merger Trainwreck' Exemplars Pertaining to the Present Business-Merger Wave
CAPSULE DESCRIPTION
This Coursework Assignment calls for applying today's prevailing merger valuation ("MergVal") methodology or methodologies per Ch 3 of your Masterminding the Deal ("C&M") course text to identify the worst of the worst deals closed since the beginning of the present business-merger cycle, defined here as Jan. 1, 20122.
You are to proceed through a two-sequence process in your diagnostic work on this Assignment. First you are to develop a ‘Long List' of statistically relevant suspect failed deals. From that list, you are to develop a subset of the worst five list. Criteria based on MergVal prevailing methodologies is to be rigorously and insightfully applied in both of the analyses.
BASIS FOR EVALUATION
PREFACE 1: You are to organise your paper in terms of each of the sections noted below, excluding the last (F, below).3
PREFACE 2: You err significantly if you believe that the essence of this Assignment is merely to identify and describe five very bad deals. That part (E) alone represents 10 points of 100 total, only. Read and understand parts A-D also; the analytical completeness of your steps leading up to the selection of your Final Five Exemplars are far more important points-wise than listing five deals that you subjectively perceive as value-destructive.
A: Demonstrated In-Depth, Full Understanding of Today's MergVal Prevailing Methodologies including components
How can one possibly achieve an acceptable mark for this paper without full and complete applied understanding of today's two prevailing merger valuation methodologies, upon which informed determination of deal success or failure relies?
The short answer is that one cannot.4 A paper lacking such requisite foundation understanding is built on quicksand, in diagnostic terms. Deficient understanding of APP and NRS and the issues and components comprising both plagues less accomplished submissions.
The relevant bromide is You cannot achieve what you cannot measure. The student who fails to exactingly differentiate between a good M&A deal and a bad one in NRS-APP terms is severely self-handicapped.
So how best to demonstrate this in-depth comprehension and command? Certainly not by repeating phrases from the C&M text or/and lecture slides back to the marker: mere parroting of others' statements is almost worthless and never on its own conveys understanding. It is more through the manner that the submitting student differentiates on an NRS-APP basis between those deals that are included in your ‘Long List' of deals from those which are not included that such a sense is communicated. Similar considerations apply to your cut-down from Long List to Final Five Worst Mergers Exemplars.
B: Sampling Research Relating to Long List Development
This Assignment calls for systematically identification and description of the Five ‘Worst Merger' exemplars, with those five are derived from a much larger sample set of apparent failed deals as determined on a synergy-v-premia (NRS-APP) basis.
For the Long List, adequate sample size is critical. But how best to determine how many ‘bad' deals should be included? Unless there is reasonable confidence that the Final Five are selected from an adequately large universe of toxic deals, any claims that the smaller Final Five set are worst exemplars tends not to be convincing.
YOU are responsible for specifying the methodological basis which indicates that your chosen Long List sample size (n) is adequate. Creswell, Miller, Crabtree and Remenyi are some of the more prominent names contemplating issues of sample size (‘n size') methodological adequacy. Skipping this sampling research requirement not only means abandoning the designated evaluations of parts C through E may also be endangered, if your Long List of poor deals is considered to be lacking.
C: 'Long List' Developed on Convincing APP and NRS Basis
How best to proceed in developing your Long List? NRS and APP broad parameters provide a start point. But be mindful that acquirers' self-assessment of their own transactions tend to be notoriously over-optimistic when and if synergy and premia guesstimates are provided at all. For the student completing this Assignment, this reality about much of the available ‘information' on merger success dictates adjustments and/or more realistic alternative independent perspectives.
So what if there's no credible NRS-APP analyses from your accessible sources? In such circumstances, the student should demonstrate his/her command of the key concepts in this paper by providing his/her OWN independent, more credible NRS-APP diagnosis.5
D: Completeness of Analysis in Progressing From Long List to Final Five
What is the analytical path for progressing from Long List of 17+ to your Five (presumably) worst deals of the present business-merger cycle?
Ranking bad deals by NRS minus APP net amount provides one ways to identify the worst five M&A transactions, presuming an accurate Long List with adequate sample size (n).
And then there are supplementary indications of merger failure. Historically, write-offs (e.g., Countrywide Financial, following acquisition by Bank of America late in the last business- merger cycle) or subsequent sale at a loss (NCR, by AT&T in 1994) are examples of two of the several other, definitive indications of collapse beyond synergy-v-premia.
E: Salient Details on Your Final Five Exemplars
Presuming that B through D (above) have already been accomplished in complete manner, the Final Five Exemplar Worst Deals simply drop out. Part E applies to your further description of those five exemplar deals (financial basis and others) to affirm that your selections fully qualify as amongst the very worst merger deals consummated since 1.1.12.
F: Readability and ‘Presentability'
The poorly communicated thought is the notion which is not conveyed at all. Is the document readable and easily understandable? Properly referenced6? Correct grammar, syntax and spelling? Are cut-and-paste exhibits avoided and only newly constructed (by the student) table and figures BY THE STUDENT presented?
1.) NEVER deceive yourself into believing that submitting a paper which ‘sort of resembles the assigned work' but fails to address the Assignment Sheet's SPECIFIC REQUIREMENTS is OK.
It isn't.
A recurring evaluators' comment of papers causing anguish for markers and submitters alike is: RE-READ THE ASSIGNMENT SHEET; YOU DO NOT ADDRESS THE SPECIFIC REQUIREMENTS CLEARLY SPELT OUT IN THAT DOCUMENT.
The question to ask yourself: Have you done everything required to avoid that comment and the low pass or worse mark that accompanies it? This AS specifics what is required for acceptable mark with exacting clarity. There is no requirement for any further clarification.
From (a) demonstrating a clear understanding of the two closely related prevailing MergVal criteria per C&M Ch 3 to (b) your identified sampling methodology resulting in ~17-29+7 Long List bad deal database, to (c) applying MergVal components progressing from 17-30+ down to 5, your direction forward in pursuing a pass or better is unambiguous as described herein.
Merely compiling various different news media ‘bad deal' lists or re-stating those publications' guesses about poor deals are often almost worthless for purposes of this Assignment.8 One has to go to the level of the individual transactions MergVal detail in both Long List and Final Five to separate the deal value truth from acquirers' hype.
Two thirds of all deals fail (C&M, Ch 5 Pt 1). NOT A SINGLE deal (not even AOL/TimeWarner and RBS/ABN Amro) is acknowledged as a failure at the time of clos.
2.) The very extensive time available to do this assignment means particularly dire consequences for the late, one week, slipshod effort
At best, the marginal papers that only obliquely address that Assignment Sheet's specific requirements (and sometimes not even that), might sometimes manage a low pass or a close fail.
DON'T COUNT ON THAT FOR THIS ASSIGNMENT. Of course depending on the quality and completeness of your analysis, you should anticipate that ‘one week wonders' will almost assuredly result in a decisive fail, that is, marks of 30 or less. You are forewarned.
There is reasonable flexibility in terms of the identified Final Five: this cycle has seen more than a dozen disaster-scale deals closed during this business-merger wave starting 1.1.12 either collapsing already or showing indications of nearly-assured disaster. However, Long
Lists of underperforming deals should be very similar, at least from the top-evaluated students' papers9.
3.) Do not ignore the sampling research requirement
Do you wish for your starting mark before any deductions to be 92 instead of 100? Then disregard everything in this AS about researching appropriate sampling methods in developing your long list of 17-29+ example failures. And while you're at it, forget the entire Long List thing and just directly go to your Final Five exemplars (this last is a facetious statement).
Why the sampling part and the Long List important? Because you cannot begin to assert that your Final Five are the exemplars of the WORST deals of the present cycle unless those have been chosen from a statistically qualifying, longer base list.
Is there a slight chance that a convincing Final Five might be developed direct, that is, without referring to a larger sample Long List? In theory, yes: it is unlikely but remotely possible that your five random guesses happen to be amongst the 5-9 deals identified as a result of a more complete process.
But excluding the Long List (and your chosen and applied sampling method to accomplish that) means that you ignore an important required part of both process and content for this Assignment.
4.) Be wary of the acquirer's guesstimates about synergies in particular: MergVal is still treated as financial PR by many buyers and their entourage
One of the biggest mistakes an outsider can commit in assessing merger transaction chances of success is to primarily rely on the synergy and premia calculations originating from the buyer or its banker-advisors.
Independent? The buying firm's CEO and his/her entourage and financiers all have a vested interest in to spin the deal to appears in the most favourable light possible to the pop-biz media.
QUALITY determinations of APP (C&M, 96) & NRS (222)- deal evaluations that move markets and swing the acquirer's share price only slightly down or disastrously lower at the Expression of Interest (EoI) date- are independently and conservatively developed.
At best, buyers' MergVal bias means calculations at the high end of objectively plausible extreme. At worse, manipulations of the critical first date in the APP calculation and/or fantasy synergies introduce material distortions. According to Breakingviews' ace Rob Cyran, acquirers in Pharma routinely overstate deal synergies by 30+%.
The TRUE APP and NRS characteristics dictate the deal's success or failure. Merely repeating the acquirer's numbers is (valueless) transcription, rather than (valuable) analysis. Which will your paper reflect?
5.) Do not ignore substantive differentiating criteria relating to the components of prevailing MergVal in progressing from your Long List to your five exemplars
How do you progress from your 17-29+ Long List (LL) down to your Final Five? Not at all- you just go directly to the Final Five? The negative consequences (evaluation-wise) of unfortunate choice are already addressed above.
Generalised Value Gap (C&M, 91) criteria probably suffices for LL, presuming that the more serious buyers' hype (above) is cancelled. But by definition, a Very Value-Destructive Merger Long List by definition is is likely to be comprised of deals in which the buyer either (a) excludes NRS-APP analysis altogether (because of the adverse results) or/and (b) offers alternative ‘soft' justifications of the Bruner-Brouthers-Epstein type: ‘strategic fit'.
But electing the exemplar Final Five from the larger base requires some precision. Quality-of- analysis and thus evaluation-wise, there is a considerable difference between a process in which those FIVE are identified according to specific MergVal criteria, and the paper in which the progression from large list to Final Five is either not apparent and/or not convincing. Don't place yourself on the wrong side of this evaluation component.
6.) Excessive exposition and cut-and paste graphics (including from this course's lecture slides) are a negative, not a positive
It isn't just that wandering stories about how some mergers are ‘bad' and the effects aren't part of the deliverable here. It's that such hollow exposition signals to a marker that the student is struggling with this Assignment. A low pass is often the consequence of such wordy bluffs.
7.) Any and all groupwork on this Assignment equals plagiarism
For purposes of this Assignment, "groupwork" is included as part of the plagiarism provisions in the UCL School of Management AY 2015-2016 Guideline to Students, which it is presumed that all students submitting this Assignment possess already. We are solely interested in each individual's analysis, not group. Kindly note that any communication or collaboration with other students taking this course on this assignment is defined as "groupwork", even at early idea-sharing.
Don't do it, past instances of this practice have been spotted and very detrimental to those involved.
8.) Thinking about cut-and-paste exhibits from M&A pop-biz media or the lecture slides? Better reconsider.
At best, this is lazy scholarship. At worst, this particular regrettable practice reflects a disturbing unwillingness or inability to distinguish quality MergVal analysis from ragged, suspect theories. Whilst today's MergVal principles are extensively utilised by leading M&A analytical practitioners in this field, biz-media charts and tables are often based on naïve conceptions about what comprises a ‘good' merger.
If there is a key point directly corresponding to key required deliverables of this Assignment to best be made utilising a graphic, construct your own from multiple original sources, instead. Cut-and-paste activity is almost as worthless as transcribing some breathless, poorly- informed newspaper stringer's M&A opinion of dubious worth.
OTHER
Acceptable deals for inclusion in your lists and analyses are dictated by the headquarters location of the acquirer at the time of that deal's Expression of Interest (EoI) date. This stipulation applies both to your Long List and shorter list and descriptions of ‘bad deal' exemplars: United Kingdom, Ireland, France, Germany, Canada, United States, Australia only. The US has been the most acquisition-active since 1.1.12, and thus deals initiated by companies in that country should predominate in your study.
Neither the Course Leader or the Post Graduate Teaching Assistant (PGTA)will be drawn on any and all queries (via email, only: [email protected]) pertaining to the following regarding this Assignment, at any time, so kindly do not ask about: analytical methodologies, identification of and/or access to possible research information sources, minimum or maximum Long List sample sizes (n), specific model exemplars or Long List candidates. The last date for any and all further enquiries of this type (via email only) is the end of Jan. 2016. No exceptions or extensions of that Query Moratorium.
There are no ‘example papers' available to you as this is an original topic, so please do not request such papers: they don't exist. Bruner's Deals From Hell (2009) was a book written at
the end of the preceding business-merger cycle which attempted to spot poor deals of that era12. Based on his 2002 and 2004 papers, Bruner does not subscribe to today's prevailing
MergVal methods, so his selection basis may arguably be viewed as suspect (and besides, his analysis covers an ineligible time period for purposes of this Assignment). That book may however be helpful to you in identifying what a ‘bad deal' looks like, in general terms.
Advance reads of draft documents prior to submissions is not possible, either by the Course Leader or PGTA, so kindly do not enquire about this. The guidelines in this AS are very specific; if your deliverable is fully consistent with the approximate evaluative guidelines as described herein, you have every reason to anticipate a favourable assessment.
As is customary for UCL School of Management (SoM) Assignments of this type, final marks are subject to multiple possible evaluators-markers and also to review by an internal examiner. ‘Re-reads' or re-evaluations are never possible, so kindly do not request either of these or equivalents. The basis for evaluation for this Assignment is considered to be fully complete and accurate, and academic judgment applied in marking is not a matter for deliberation or discussion with the student.
Per the M&V Course Outline vAY 2015-2016, you need not receive a passing mark in this Assignment in order to pass the M&V course overall, depending of course on your final exam mark. However (also per that CO), students who fail to either (a) submit this Assignment on a timely basis per the deadline herein, or (b) submit a paper deemed to not represent an earnest effort to meet the requirements and parameters as outlined in this Assignment Sheet may possibly be denied the right to sit for this course's final unseen exam.
Attachment:- Assignment.rar