M010LON GLOBAL FINANCIAL MARKET (APRIL TERM 2017) COURSEWORK BRIEF AND CASE STUDY

1. Background
Read the news announcement ‘BAT proposes merger with Reynolds’ (enclosed case study with link provided below) to perform the following tasks of analysis and write up your finding and research in a report format. You are encouraged to conduct research on the effects of the news on share price and outline your analysis of the event.
http://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAEWNJY
This is an ongoing case of M&A. The study should emphasize the state of the play, valuation and trading strategy going forward. Students are encouraged to take a forward-looking view on the future of acquisition event. All related regulatory announcements can be found on BAT website under: investors/ results and reporting / stock exchange announcement:
2. Objectives
• Conduct in-depth background research to enhance the analysis of the acquisition event. Such research should demonstrate in-depth understanding on the working of the sector. You should set up a timeline (see Section 3 below) to reflect the chronicle of events and key dates. (10%)
• Conduct comprehensive valuation on BAT and Reynolds prior to the acquisition announcement. Your valuation should use relevant valuation technique(s) to arrive at an appropriately discounted present value (per share) for BAT and Reynolds. (20%)
• Evaluate the extent of price impacts on BAT and Reynolds following the news announcements on acquisition. Does the movement of share price reflect the insights from Efficient Market Hypothesis (EMH)? (20%)
• Conduct event analysis to test EMH and derive your trading profit from the event. An event analysis template is provided separately based on Chapter 14 contents of Simon Benninga textbook ‘Financial Modelling (4th edition)’. (20%)
• You are required to demonstrate trading strategies and instruments that would be appropriate to exploit price efficiency/inefficiency during the process of acquisition. Your analysis should forecast possible trading profit going forward until the appropriate cut-off date. (20%)
• Conclusion and Recommendation. Conclude your analysis based on the above analysis and recommend appropriate course of action for trading on this M&A event (10%)
3. Timeline
The announcement of the above event occurred on 21 October 2016. The cut-off or last date
of your analysis should be 27 June 2017.
Respectively, your estimation window* should run at least one year before the event announcement date, e.g. from 21 October 2016.
Page 1 of 3
Your event window should have a cut-off or last date on 27 June 2017. You can also simulate price behaviours for both companies going forward passing 27 June 2017 if you want to but this should have no bearing on the result of the assessment.
*See Chapter 14 Simon Benninga’s textbook for the definition of ‘estimation window’.
4. Format and Weighting
Organize your findings in a Report format according to the weight presented in Section 2.
The length should be no longer than 2,500 words. You need to provide data and valuation result in Excel format and as evidences in the appendix.
Your Excel model also needs to be sent separately to both your module leader and seminar tutor by email so that we verify the details of your model on your submitted paper.
References and appendixes will not be included in the final word count. Coursework Submission Deadline: See Moodle Submission Link Coursework Weighting: 100%
5. Key Learning Outcomes
• Demonstrate knowledge of the purpose and functions of global financial markets
• Analyse the role of financial market data in supporting business decisions
• Critically evaluate the impact of the global financial markets on the business environment • Demonstrate the ability to analyse and present quantitative data to support an argument.
• Use information technology to analyse and communicate financial data
• Reflect on your own ability to interpret and act upon the changing business environment.
6. Late submission
Late submission will be marked at 0 but will allow a resit opportunity. No submission will be recorded as ‘Absent’. Extensions will be in accordance with University policy.
7. Grades
You must check that all your coursework marks have been recorded accurately on Moodle and notify your module leader if you believe a mistake has been made. All grades are provisional until confirmed by the Subject Assessment Board. It is possible that notified marks may be raised or lowered by this board. Students are encouraged to keep copies (electronic) of all coursework submitted on this module.
Page 2 of 3
8. Plagiarism
Students are advised to consult the University Regulations* and their course handbooks regarding the penalties for and definition of plagiarism, which essentially is the deliberate and substantial insertion in your own work of material from someone else e.g. a published source such as a book or article, or simply another student’s piece of work, without acknowledging the extent or source of the quotation.
*To view regulations use the University website.