Principles of Corporate Finance
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Based on the takeover of Cadbury by Kraft:
a) Explore and evaluate the potential motives for the takeover
b) Evaluate the takeover process
- Analyse the takeover process and final valuation. What was the initial bid and the subsequent price paid, what was the bid premium?
- Defence tactics – what tactics were employed? Were they sensible?
- How was the takeover financed by the acquiring company and what form (shares, cash etc) did the payment to the shareholders in the target take? What were the implications for both sets of shareholders?
c) What are the issues involved in trying to evaluate the ‘success’ of the takeover? How can success be measured? What are the problems in trying to measure ‘success’? Has the Cadbury takeover been successful?
Where appropriate your analysis should make reference to relevant theory.
Please prepare a Powerpoint presentation containing 12 – 18 slides, with supporting notes, covering your findings Extensions to this deadline will only be given in exceptional cases (illness, bereavement) and requests for extensions must be accompanied by documentary evidence.
Suggested Reading List (in addition to your module textbook)
Brouthers, K., van Hastenburg, P., van den Ven, J. (1998) ‘If most mergers fail why are they so popular?’ Long Range Planning, Vol. 31, No. 3, pp347 - 353
Articles from the Financial Times
- Kraft faces a question of digestion / By Greg Farrell in New York / Published: February 15 2010 02:00
- Bitter-sweet end to Cadbury's 186 years of independence / By Jenny Wiggins and Jonathan Guthrie / Published: February 3 2010 02:00
- Ferrero will not offer Cadbury a sweeter deal / By Vincent Boland in Milan and Jenny Wiggins in London / Published: January 25 2010 16:32
- A debt-equity conundrum for all dealmakers / By Tony Jackson / Published: January 25 2010 02:00
- Buffett criticises $19bn Cadbury takeover as 'bad deal' for Kraft / By Greg Farrell in New York and Jenny Wiggins and George Parker in London / Published: January 21 2010 02:00
- Cadbury and Kraft agree £11.6bn deal / By Jenny Wiggins and Lina Saigol / Published: January 18 2010 21:18
- Cadbury rejects £10.2bn move by Kraft / By Philip Stafford in London and Haig Simonian in Zurich / Published: September 7 2009 07:29
This is not an exhaustive list and you should look for more recent articles and information published by the FT, the Economist and on the BBC website. You will find a guide to searching the Financial Times posted in Teaching Resources on StudyNet.
Other sources may be used but marks may be lost if these sources are not appropriate. Try to avoid websites such as Wikipedia, Investopedia and other such sites.
5BUS1094 Principles of Corporate Finance Coursework 3 Assessment Criteria
You will be assessed on the following areas:
- Evaluation of potential motives for merger/acquisition (30%)
- Theory relating to motives
- Specific company factors
- Application of theory
- Takeover process, defence tactics and financing (30%)
- Demonstration of a clear understanding of the particular takeover bidding and funding process (cash/shares etc) plus any defence tactics employed by the target company
- Evaluation (with respect to theory) of the implications for the shareholders of both companies involved
- Evaluation of the ‘success’ of the merger/acquisition (25%)
- Evidence of reading regarding the difficulty of measuring ‘success’
- Appreciation and evaluation of issues specific to the companies involved.
- Presentation (15%)
- Clarity of information
- Referencing of information (Harvard referencing format)