Assignment Task

Company Presentation

The objective of this section is to provide a comprehensive overview of the target company, including its business model, growth opportunities, and financial situation. By the end of this section, the client should have a clear understanding of the company’s current financial status and future prospects.

To create a complete picture of the company, include the following:

• Historical profitability and growth
• Leverage and financial soundness
• Future prospects

To gather relevant information, consult FactSet and the company’s website. For a better understanding of the industry, check IBIS World reports via the UTS library. The industry outlook section of these reports can be particularly useful for assessing scenarios and synergies.

Industry

This section aims to provide an overview of the Containers and Packaging industry, its current state, and future prospects. After reading this section, the client should understand the main risks and growth drivers in this industry and how these factors influence the assumptions embedded in your profitability model.

Deal Structure

Discussions between your client and the target have resulted in an agreement to acquire the target’s equity, with all existing debt being transferred to the new entity. Consider two deal structures:

1. An optimized structure where the mix of equity and debt maximizes profitability for the acquirer under the “baseline” scenario with synergies.
2. A structure financed solely with equity.

Funding and Financing Costs

After consulting with your capital markets division, estimate the deal’s financing using a combination of the following sources:

Profitability Analysis

This section aims to estimate the deal’s profitability (accretion in year 1, the first full year post-proforma) under various scenarios.

Operating Scenarios

Analyze the deal’s profitability under two operating scenarios:

1. Baseline: Based on your best assumptions about the standalone evolution of both firms.
2. Pessimistic: Captures a less favorable economic outlook for the next 2-3 years, representing “tough times” for the industry.

Synergy Scenarios

Model three synergy scenarios:

1. Baseline: Assumes ordinary economic conditions.
2. Pessimistic: Reflects the impact of an unfavorable economic environment on deal synergies. If the economic environment does not affect synergy extraction, this scenario will be the same as the baseline.
3. No Synergies: Assumes zero synergies.

Structure of the Presentation

There is no formal length requirement for your presentation, but typically such documents are 15-30 slides, including appendices. An example breakdown includes:

The Deal Structure

This portion should present the optimized deal structure and analyze the leverage and liquidity of the resulting entity under both deal structures (optimized and equity only) and operating scenarios. The reader should understand how the company’s credit risk evolves, e.g., whether the pessimistic scenario would push the company close to default with the optimized financing structure.