The following is indicative only. You should develop your own analysis and research based on available information.
(1) Conduct comprehensive valuation on Friends Life prior to the acquisition announcement.
(2) Evaluate the impact on the share price of Friends Life and Aviva following the above news announcement. Does the movement of share price reflect the insights from Efficient Market Hypothesis (EMH)?
(3) You are required to conduct in-depth background research on Friends Life to enhance the analysis of the acquisition event. Such research should demonstrate understandings of:
I. Capital Structure & Weighted Average Cost of Capital
II. Required Rate of Return for Equity through Application of CAPM
III. The Working of the Insurance Sector & the impact of regulation on the Insurance sector
(4) Be able to predict the outcome of the acquisition event. The finding should be specific to the price acquired within the defined timeframe as given in coursework brief.
(5) If you need to provide data and valuation result, you can include it in the appendix.
(6) References and appendixes will not be included in the final word count
Indicative Relevant Course Concepts
(to be applied) Indicative Research Resources
(a lot more electronic resources at your disposal in the library)
? Capital Structure
? Cost of Debt
? Cost of Equity
? Interest tax shield
? Stock & Sector Beta
? Efficient Market Hypothesis
? Past, public & private information ? Standard & Poor’s
? Bloomberg (G.06) – need an account to use the terminal
? Sector Beta from NYU – Professor Damodaran http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm
? Bloomberg (G.06) – need an account to use the terminal
? National website of government departments or public information gateway on insurance sector regulation
? Financial Times (FT)
? Yahoo Finance (UK)
The following news was announced on November 21 2014 and taken from Morningstar.
“The company (Friends Life) and Aviva PLC note the press speculation and confirm that they have reached agreement on the key financial terms of a possible all share combination of Aviva and the company (Friends Life). Under the terms of the Possible Offer, Aviva would acquire the entire Ords* capital of the company (Friends Life) on the basis of an exchange ratio of 0.74 Aviva Ords for each company Ords. The Possible Offer represents an indicative value of approximately 399p per company share. Aviva is required, by not later than 19 December 2014, to either announce a firm intention to make an offer or announce that it does not intend to make an offer.”
Ords* means ‘ordinary’ class of share
Discuss the impact on the share price of Friends Life and Aviva using the framework of Efficient Market Hypothesis (EMH) following the above news announcement. The starting time for discussion is November 21 2014 and the cut-off time for discussion is February 13 2015.
Present your finding in a report format no longer than 2500 words. You might include data and valuation result in the format of tables in the appendix. References and appendixes will not be included in the final word count.
Coursework 1 Weighting 25%
Students are required to submit a hard copy of their assessments and a soft copy online using the Turnitin link on Moodle.
Monday, Week 6, March 2nd 2015, 09:00
Late submission will be marked at 0 but will allow a resit opportunity. No submission will be recorded as ‘Absent’ and no resit opportunity will be offered. Extensions will be in accordance with University policy.
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.
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.
Resubmission of assignment, by the Faculty summer re-sit deadline (posted on the module web when date confirmed).
Criteria Points 0 1 2 3 4 5
Weight No attempt Fail Pass Merit Distinction Outstanding
Discussion of relevant concepts such as Cost of Capital and Efficient Market Hypothesis (EMH) in the context of case 20 No attempt A poor description of relevant concepts in the context of case. A poor interpretation of relevant concepts in the context of case. A reasonable description of relevant concepts and a weak or insufficient interpretation of relevant concepts in the context of case. A good description of relevant concepts in the context of case. A sufficient interpretation of relevant concepts in the context of case. An excellent description of relevant concepts in the context of case. A clear interpretation of relevant concepts in the context of case. An outstanding description of relevant concepts, and an excellent interpretation of relevant concepts in the context of case.
Application of relevant analytical tools to discuss the price impact on both firms following the news announcement 30 No attempt A poor evaluation. Written analysis, if attempted, is confused. A weak evaluation. Written analysis attempted but lacks depth. A good evaluation. Evaluation is adequate with relevant points being made in the written analysis. An excellent evaluation. A relatively well reasoned discussion/critical evaluation of the results. An outstanding evaluation. Well-reasoned discussion/critical evaluation of the results.
Link theories with application and demonstrate critical understanding on the limitation of the theories in the context of case 20 No attempt Very poor discussion. Theories are discussed poorly. The discussions are not coherent. A weak discussion of the theories, explanations are weak with no evidence of wider reading, no justification being given in the discussion. A good discussion of the theories. Theories have been explained and correctly applied. Some evidence of broader reading. Some linkages made between theories and applications. An excellent discussion of the theories. Theories have been explained and critically appraised partly with reference made to appropriate academic research. Relatively strong evidence of broader reading. Good linkages made between theories and applications. An outstanding discussion of the theories. Theories have been explained and critically appraised with reference made to appropriate academic research. Correct application of theory and excellent linkages made between theories and applications.
Presentation 10 No attempt Poor presentation weak presentation Good presentation Excellent presentation Outstanding presentation
Reference 10 No attempt Poor referencing throughout. No evidence of being able to undertake own research or collect relevant data Weak referencing throughout. Little evidence of being able to undertake own research and collect relevant data Good referencing throughout. Some evidence of being able to undertake own research and collect relevant data Excellent referencing throughout. Adequate evidence of being able to undertake own research and collect relevant data Outstanding referencing throughout. Strong evidence of being able to undertake own research and collect relevant data
Class Participation 10 No attempt Little class participation. Weak class participation. Good class participation. Excellent class participation. Outstanding class participation.
Total Sum 100
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