Reference no: EM132522609 , Length: word count:4800
FIN342 Applied Corporate Finance - Kaplan University
Learning outcome 1. Critically assess the objectives and processes of corporate financial management.
Learning outcome 2. Analyse the roles of the key stakeholders and decision makers in a corporation's financial management.
Learning outcome 3. Evaluate corporate financial management strategies such as working capital management and capital budgeting.
Learning outcome 4. Integrate the key theories which inform the fundraising and capital structure management process.
Learning outcome 5. Apply corporate finance principles in a practical setting.
Case Study: Dick Smith Group
Question 1 Investment and financing (word limit: 1000words)
(a) Critically analyse the expansion strategy of DSG following its float.(10 marks)
(b) Review DSG's balance sheet and funding arrangements leading up to the its collapse at the end of 2015.(10 marks)
Question 2 Analysis of financial management issues (word limit: 1,400 words)
(a) Summarise the reasons why DSG failed.
(b) Discuss the potential decisions from the financial manager that may have contributed to the collapse of Dick Smith Group, regarding the firm's:
(i) Working capital management
(ii) Capital budgeting
(iii) Financing
(iv) Financial risk management.
(c) In your opinion, to what extentmightthe financial manager have been successful in helping DSG avoid collapse.(7 marks)
Question 3 Value creation and M&A (word limit 2,400 words)
In a relatively short period of time, Dick Smith was subject to a series of significant corporate transactions. The sale of the business by Woolworths to the private equity fund Anchorage (November 2012); the sale of the restructured business by Anchorage to the public by way of an IPO (December 2013); and, the financial collapse of the business requiring the voluntary appointment of an administrator (January 2016).
These corporate transactions received significant attention from the media and other parties, often with the benefit of hindsight.
Please refer to the following source documents:
• Dick Smith prospectus 21 November 2013 (available on DatAnalysis database in KapLearn under ‘Kaplan Library')
• Article by Matt Ryan of investment fund Forager ‘Dick Smith is the greatest private equity heist of all time' 29 October 2015
(a) ‘The price Woolworths received for the sale of Dick Smith was ridiculously low.'
Reflect on this statement made by a disgruntled Woolworths' shareholder shortly after Anchorage announced the Dick Smith IPO. Based upon information available at the time of the IPO, including the prospectus, and given the prevailing circumstances when Woolworths sold Dick Smith, comment on the validity of the opinion expressed in this statement.
(b) List the major issues of concern raised in the article by Forager and comment on the validity of these issues. Include in your answer, as appropriate, statements made by Anchorage in its submission to the Senate Inquiry.
(c) Within the context of value creation, assess the sustainability and efficacy of the transformation strategy and initiatives undertaken by Anchorage.
(d) Reflect on the statement (made by a retail analyst when the Dick Smith share price collapsed): ‘Only a fool would buy shares in an IPO where a private equity fund is the exiting vendor.'
Why might such a view be misguided and potentially result in poor investment decisions?
(e) Review the post IPO share register (refer to the IPO top 20 shareholding notice) and the post IPO share price performance of Dick Smith. What inferences (if any) can be made on the market view of the veracity of projected performance for the company as set out in the prospectus.
(f) Reflect on the statement made by a fund manager when Dick Smith went into voluntary administration: ‘The market gets it right nearly all of the time.But it was wrong on Dick Smith.' Discuss whether you think the market ‘got it wrong'.
Attachment:- Applied Corporate Finance.rar