Module Code: MN7024
Module Leader: Mark Burridge
This module will be assessed through the use of two interrelated pieces of work. The first of these, part I, is worth 10% of the marks. The second, part II, is worth 90% of the marks.
To pass the module you must achieve an overall mark of 50% +.
Part I involves the use of SPSS to analyse the data contained in Mergers and Performance.xls. You are required to submit a word document containing the results of your analysis by 5th December 2019. Just include the results of your analysis. Do not include any additional information (or words).
Deadline for Submission of Part I: 5th December 2019.
Part II requires an assignment/report which focuses on interpretation of the results shown in the tables produced for Part I. For Part II you need to produce your own summary tables for the main body of your report. Do not cut and paste SPSS, etc. tables into your report. Instead, include details of your analysis in an appendix.
Deadline for Submission of Part II: 3rd January 2020.
Maximum length for Part II: 3000 words (this does not include graphs, tables or appendices).
Specifics of the assignment are shown below. Course members will be assessed on their analysis, presentation and associated discussion. Please note that details of the submission arrangements will be conveyed to you by the School of Business Student Office.
Read the case notes below and consider the information shown in the appendix.
Determine how this information can be used to shed light on the effect of mergers on company performance. Then undertake appropriate statistical analysis and save your results (Part I).
Write a report for the Directors of JP Drew which explains this analysis and considers the implications of the results in terms of long term post-merger performance (Part II).
Long Term Post-Merger Performance
You have recently been appointed as an analyst within PMC Inc. PMC is a UK consultancy company that undertakes independent research for client organisations.
Your first client is a large investment management firm (JP Drew) which provides advice and administrative services to both individuals and companies in relation to portfolio selection and specific asset purchases (stocks, bonds, etc.).
JP wish to undertake some analysis looking at mergers in the financial services industry. There are two specific issues that they wish to address. Firstly, whether companies which have merged with other firms in this industry exhibit greater efficiency. Secondly, whether such mergers result in superior financial performance.
You have been asked to undertake some quantitative analysis looking at this issue. While you are familiar with various different aspects of statistics and a number of statistical packages you have not undertaken a project of this nature before. Hence you start by conducting a literature search.
This search proves beneficial and you find that a number of studies have looked at the performance implications of mergers, although none of these seem to be very recent.
In terms of theoretical work two principle arguments have been put forward to suggest why mergers and acquisitions have a positive impact on corporate financial performance. The first of these postulates that the merged company should exhibit lower costs as a result of economies of scale and synergy gains. The second that mergers lead to greater levels of market power for the merged firm and this results in higher prices in the market place.
Previous empirical work has used various measures of company performance including accounting profit, return on assets and market to book value, and most of these studies consider a two or three year time horizon because any benefits associated with a merger may take time to feed through. Some have also attempted to measure efficiency and marker power. All such studies also contain ‘control variables’ which are likely to impact on company performance. The most frequently used of these are firm size and sales growth.
From the material you have identified you draw up a list of variables which may help identify the impact, if any, of mergers on company performance. You then obtain numerical data on each of these variables (details of the data can be found in Appendix I).
You now need to consider how you will analyse this information. In addition you need to consider how you will explain the approach(es) you have adopted and the implication of your analysis given that the Directors of JP Drew are not experts in quantitative or statistical methods.
The Zephyr database allows identification of 442 mergers in the financial services industry. You then contact a well-known financial data provider to obtain data on the variables shown below for both these merged firms and a matched set of non-merged equivalents. All of this data can be found in Mergers and Performance.xls. In total there are 600 observations. Variable definitions are given below.
PostROA: Merged firms – post-merger return on assets of the combined firm,
percent (three year average post-merger).
Non-merged firms – return on assets for the same time period as
merged firms, percent (three year average).
PreROA: Merged firms – pre-merger return on assets of the combined firm,
percent (three year average pre-merger).
Non-merged firms – return on assets for the same time period as
merged firms, percent (three year average).
Power: Merged firms – post-merger market power, proxied by market share
(three year average post-merger).
Non-merged firms – market power for the same time period as merged
firms, proxied by market share (three year average).
Growth: Merged firms – growth in sales, percent (three year average
Non-merged firms – growth in sales for the same time period as
merged firms, percent (three year average).
Costs: Merged firms – post-merger operating costs divided by operating
income, percent (three year average post-merger).
Non-merged firms – operating costs divided by operating income for
the same time period as merged firms, percent (three year average).
Size: Merged firms – total assets of company, £ million (three year average
Non-merged firms – total assets of company for the same time period
as merged firms, £ million (three year average).
Merger: 0 for non-merged firms,
1 for merged firms.
In structuring your analysis and your report you may wish to consider the following framework. This does not mean that you simply respond to (a) to (d) below, but rather that you formulate headings and sub-headings for your report using the framework as a starting point.
(a) A graphical representation of the data and a discussion of any issues or patterns which arise from this exercise. You need to decide upon the exact data to use and appropriate graph(s).
(b) Univariate (single variable) and bivariate (two variable) analysis and discussion which considers the effect of mergers on company performance.
(c) Multivariate analysis and associated discussion which makes use of the data given in Mergers and Performance.xls.
(d) Any other issues, problems or additional complications which you feel should be conveyed to the Directors of JP Drew with respect to your analysis.
Remember, the Directors of JP Drew are not experts in statistical analysis. Hence you will need to explain what you are doing and why, as well as the meaning of your results.
Important points to note:
- In your report you are required to provide explanation and discussion.
- Do not produce graphs if you cannot provide related discussion.
- Do not produce tables if you cannot provide related discussion.
- Do not cut and paste Excel, SPSS, etc. tables into your report. Produce your own summary tables in the main body of your report.
An example of ‘what you are doing, why, and the meaning of results’:
“The analysis consists of cross-tabulations and a logistic regression. The cross-tabulations, which make up the brunt of the report, allow one to see the interrelationship between two or more variables. For example, what percentage of whites and African-Americans play lottery games? Or, who spends more per month on lotteries, those younger than fifty or those older than fifty? The investigators use cross-tabulations to illustrate the relationship among demographic characteristics (e.g., age, education, income), attitudes toward lotteries, how frequently residents play lottery games, and how much they spend on them.” (Piliavin and Entner Wright, 1992: 2)
“As shown in column four, several demographic characteristics of the 1991 respondents significantly predict lottery play. These include gender, age, marital status, and education. First, men are more likely to play the lottery than women, with an estimated regression coefficient of .3242 (top of column four). Being positive, this coefficient indicates that male respondents (coded as 1) have higher probabilities of lottery play than female respondents (coded as 0).” (Piliavin and Entner Wright, 1992: 58)
A few more example reports:
A literature search/review is not a requirement because the main objective of this assignment is for you to think through the issues that can be addressed using the data provided. However, good use of secondary material in introduction or conclusion will be rewarded. If you use such material it should be referenced in your report and the full citation must be provided in a bibliography.
Criteria for a good assignment:
- good understanding of key concepts and ideas
- some imagination and originality
- development of argument so that the whole assignment hangs together.
When you write your assignment, consider the following:
- Before you begin, work out on paper a detailed outline of the structure of your assignment and the arguments you will develop.
- In the introduction, you should set out your main themes and intentions: describe the issue you are addressing, identify its main components, and indicate what you are going to do in the body of your essay.
- Break down your arguments into main parts – use this as a basis of your assignment that will then be divided up into several sections (you may want to have section title for each section).
- Build up your argument point-by-point, section-by-section, so that you develop a picture that slowly develops in the reader’s mind.
- Always try to put yourself in the position of a critical reader, ask yourself how s/he would react to your assignment, how s/he would understand it, be persuaded by it.
- Do not simply describe the ideas you’re dealing with, provide an evaluation.
- Summarise your arguments in a conclusion. What is the main significance of what you have been saying?
|Mark||Postgraduate Grade Descriptor|
|85-100%||Scholarship: Excellent application of a rigorous and extensive knowledge of subject matter; perceptive; demonstrates a critical appreciation of subject and extensive and detailed critical analysis of the key issues; displays independence of thought and/ or a novel and relevant approach to the subject; reveals both breadth and depth of understanding, showing insight and appreciation of argument.
Independent learning: Work draws on a wide range of relevant literature and is not confined to reading lists, textbooks or lecture notes; arguments are well supported by a variety of means.
Writing skills: Writing skills are excellent; writing is clear and precise; arguments are logical, well-structured and sustained, and demonstrate thorough understanding; conclusions are reasoned and justified by evidence.
Analysis: Work demonstrates a robust approach to analysis that is evident of a deep understanding of relevant concepts, theories, principles and techniques. For quantitative modules analysis is complete and entirely relevant to the problem.
|70-84%||Scholarship: Very good application of a rigorous and extensive knowledge of subject matter; demonstrates a critical appreciation of subject; displays detailed thought and consideration of the subject; reveals very good breadth and depth of understanding.
Independent learning: Work draws on a range of relevant literature and is not confined to reading lists, textbooks or lecture notes.
Writing skills: Writing skills are well-developed; writing is clear and precise; arguments are logical, well-structured and demonstrate thorough understanding; conclusions are justified by evidence.
Analysis: Analytical steps carried out carefully and correctly demonstrating that it is based on a sound understanding. Analysis is relevant to the problem and is complete and is placed in a clear context.
|60-69%||Scholarship: Good, broad-based understanding of subject manner; makes effective use of understanding to provide an informative, balanced argument that is focussed on the topic; reveals some attempt at creative, independent thinking; main points well covered, displaying breadth or depth but not necessarily both; broadly complete and relevant argument;
Independent learning: Sources range beyond textbooks and lecture material and are used effectively to illustrate points and justify arguments.
Writing skills: Arguments are presented logically and coherently within a clear structure and are justified with appropriate supporting evidence; capably written with good use of English throughout; free from major errors; complex ideas are expressed clearly and fluently using specialist technical terminology where appropriate.
Analysis: Some minor slips in the steps of the analysis and some minor gaps in understanding of underlying principles. Analysis is relevant to the problem and mostly complete. A good interpretation which conveys most of its meaning.
|50-59%||Scholarship: Some but limited engagement with, and understanding of, relevant material but may lack focus, organisation, breadth, and/or depth; relatively straightforward ideas are expressed clearly and fluently though there may be little or no attempt to synthesise or evaluate more complex ideas; exhibits limited independent creative thought; adequate analysis but some key points only mentioned in passing; arguments satisfactory but some errors and perhaps lacking completeness and relevance in parts.
Independent learning: Sources restricted to core lecture material with limited or no evidence of wider reading.
Writing skills: The question is addressed in a reasonably clear, coherent and structured manner but some sections may be poorly written making the essay difficult to follow, obscuring key points or leading to over-generalisation; competently written with a good use of English throughout (few, if any, errors of spelling, grammar and punctuation). Answers that have merit class qualities may fall into this category if they are too short, unfinished or badly organised.
Analysis: Minor slips and occasional basic errors in analysis. Underlying principles are mostly understood, but clear gaps are apparent. Analysis falls short of completeness and is a little irrelevant in place but a reasonable interpretation which goes some way to convey its meaning
|45-49%||Minimum requirements have not been met.
Scholarship: Inadequate understanding of key issues and concepts; some material may be used inappropriately; uninspired and unoriginal; relies on limited knowledge; analysis poor or obscure, superficial or inconsistent in places; arguments incomplete, partly irrelevant or naive.
Independent learning: Restricted to a basic awareness of course material and textbooks; meagre use of material to support assertions.
Writing skills: Poor use of English exhibiting errors. Answer may be poorly focussed on the question, lack rigour and/or consist of a series of repetitive, poorly organised points or unsubstantiated assertions that do not relate well to one another or to the question, although some structure discernible.
Analysis: Inadequate knowledge of the analysis to be followed, with frequent errors. Some attention paid to underlying principles, but lacking in understanding and frequently irrelevant. Some interpretation is given, but it does not place the analysis in any real context
|40-44%||Scholarship: Poor knowledge of relevant material; omission of key ideas/material; significant parts may be irrelevant, superficial or factually incorrect; inappropriate use of some material; mere paraphrasing of course texts or lecture notes; key points barely mentioned; very weak grasp or complete misunderstanding of the issues; inclusion of irrelevant material; does not address the topic or question.
Independent learning: Restricted to a basic awareness or no awareness of course material and textbooks; very meagre use of supporting material or unsupported assertions; use of irrelevant or unconvincing material.
Writing skills: Unacceptable use of English (i.e. comprehension obscured by significant and intrusive errors of spelling, punctuation and grammar); poor and unclear, or totally incoherent, structure. Answers that ‘run out of time’ or miss the point of the question may fall into this (or a lower) class.
Analysis: Erroneous analysis with mistakes. Very little attention paid to the underlying principles of the analysis. Far from complete with little relevance to the problem. Limited interpretation that reveals little, if anything, about the meaning
|20-39%||Scholarship: Displays a superficial appreciation of the demands and broad context of the question but is largely irrelevant, fundamentally flawed, or factually incorrect; inappropriate use of material; mere paraphrasing of course texts or lecture notes; key points barely mentioned; complete misunderstanding of the issues; inclusion of irrelevant material.
Independent learning: Restricted to a limited awareness of basic course material; unsupported assertions; use of irrelevant or unconvincing material.
Writing skills: Minimal structure, though may only list key themes or ideas with limited comment or explanation.
Analysis: Analysis has very significant omissions demonstrating little understanding of problem or underlying principles. Analysis may be ill suited to problem. Very little interpretation of meaning of the analysis.
|0-19%||Scholarship: No recognition of the demands or scope of the question and no serious attempt to answer it. Complete misunderstanding of the issues; inclusion of irrelevant material. May have simply failed to address the question/topic set.
Independent learning: No evidence that the most basic course material has been understood; unsupported assertions; use of irrelevant or unconvincing material.
Writing skills: Without structure; comprehension may be completely obscured by poor grammar, spelling, punctuation.
Analysis: Virtually complete failure to carry out analysis. No evidence of understanding of underlying principles and bears no relevance to the problem. No attempt to interpret or explain the meaning of the analysis.
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