Topic 19

Hello, I'm planning to submit the RAP on topic 19 for the upcoming period 44 in May 2022. I do understand that this is an uncommon topic due to its extensive research and complexity. I plan to conduct my research on the case of Disney acquiring 21st Century Fox in 2019, satisfying the "3-year historical event requirement" while enabling me to have more data for evaluation. To get started, I would really appreciate your guidance on choosing a suitable evaluation framework/business model/accounting theories to use in this research. For the "Financial consequences", I plan to initially calculate the enterprise value of Disney then compared it with the actual amount paid, forming my own evaluation of the acquisition. Next, I would evaluate whether the EPS is Accretion or Dilution & share price performance pre & post-acquisition. I would also conduct ratios analysis for Disney per & post-acquisition to fully evaluate its financial performance. As for the "Operation consequences", I currently think to include the "synergy effects", but I'm struggling to identify a suitable model/framework for this part. I can only think of some headlines for this part such as an increase in market share (Media & entertainment sector), the potential for revenue & cost reduction...This part just does not seem to be linked together with my current knowledge. Would you kindly provide feedback for this approach of mine to the project; any recommendations and advice would be greatly appreciated. Thank you very much in advance and I hope my project and your help would be helpful and contribute further to this topic in the future.

A SWOT of the company acquired should be the starting point to indicate what opportunities it offered and leads on to why Disney may have acquired it. This is then done by looking at the synergies and doing synergy analysis - these are the usual models for this topic. The crux to the financial analysis would be an examination of the acquisition premium paid and whether this resulted in a subsequent rise in Disney's share price either immediately or soon afterwards and then whether the revenues and profits held up. Don't forget that the premium will be reflected as goodwill Bear in mind that according to the Harvard Business School that about 70% of acquisitions / mergers are not particularly successful do not be surprised if the subsequent analysis does not demonstrate that much added value was actually achieved, According to Kode, Ford & Sutherland many do not succeed because synergies are not achieved, lack of pre-acquisition due diligence and proper integration planning - seehttps://www.researchgate.net/publication/335153701_A_conceptual_model_for_evaluation_of_synergies_in_mergers_and_acquisitions_A_critical_review_of_the_literature

Hello and thank you very much for your help Gillian. Currently, I'm working on the financial analysis first, I would use the DCF model and compute the Enterprise value for both Disney and Fox pre and post-acquisition, compared with the actual consideration paid, thus, being able to identify the premium paid. Besides the WACC (which I'm having multiple assumptions as the data is not fully available), the crux for me right now is to identify a suitable "growth rate" for this model. I tried a CAGR on Revenue (~5.7%), I also read about analysis that used GDP or inflation as the growth rate (around 2-4%)...so now I'm just not certain which rate is applicable with a reasonable justification? With the size of the Disney company, I would assume that any growth rate near 10% is too high & unrealistic. In addition, with the impact of the Covid-19 pandemic, Disney's operations suffered and dragged its performance down drastically in 2020 & 2021. As I evaluate the post-acquisition performance of Disney, how would I reasonably differentiate the impact of the Pandemic vs the impact from the acquisition?