As the projects manager of a UK - based company that is quoted on the London Stock Exchange (LSE), you report to the finance director.
The company is considering making a takeover bid for another LSE listed company in the same line of business and the finance director has asked you to prepare the initial evaluation of the target company for consideration by the Board of Directors. At present you have no access to the target company beyond information available in the public domain and so the starting point will be the annual report of the company that is available on its website.
SELECTION OF A TARGET COMPANY and at least one other company in the same industry as a BENCHMARK
You have to select your own target company. Choose a UK LSE (Main Market, not AIM) listed company (other than the one you work in) in any sector except banking and other financial institutions. It must not be a subsidiary of another company or an overseas company with a UK listing. Avoid companies that have been involved in a major takeover or disposal during the period that you are investigating. It is likely that there will be some changes that will have occurred in most companies but do not choose one if the change is substantial. In addition, do not select a company that has made a loss during the period.
Send the name of your company to your local counsellor for approval. The counsellor will check that your company has already been chosen by another student and that it is a suitable company for you to analyse. Before submitting your company for approval. make sure that the other companies in the same industry so that they can be used as benchmarks to enable you to assess the performance and financial position of your company. It is unlikely that you will find companies that are exact matches but the local counsellor will provide guidance.
1. (i) Is the company growing?
(ii) What are the main strengths and weaknesses that the company has faced during the period under review
(iii) What steps should be taken to improve the performance and financial position of the company.
(iv) Is the company managing its assets effectively and able to meet its financial obligations?
(v) Is the company viewed favourably by financial markets?
2. What kind of takeover target is this company? Give reasons based on the evidence presented in your report.
(i) Strong performance, acquire and use to achieve faster growth and market share
(ii) Weak performance, could be improved with the right kind of management
(iii) Weak performance, buy up to close down and eliminate a competitor.
(iv) Potential e.g. strong resources in balance sheet, good location of activities, good reputation, could retain managers for further expansion.