Learning Outcomes: At the completion of this assignment, you expected to acquire and demonstrate: 0 C] C] D the relevant technical skills in making quantitative and qualitative assessments of a private company at the early stage of its development cycle the ability to apply and discuss the relevant theories related to endure capital investment the ability to collect and compile important financial information as well as to produce and present a detailed and convincing investment proposal report the ability to work cooperatively In a group Scenario: Your task is to act as a consulting firm to a small or medium enterprise In the United States, to develop an investment proposal and to seek funding for the proposal. Each group will be given a firm that requires expansion and bridge-to- listing capital. Preliminary Information on the each of the firms Is provided to you on Blackboard, mainly in the form of disclosure documents (filings) made by the firm to he US Securities and Exchange Commission (SEC). Should you require more Information to complete the assignment, It will be up to you to gather It. There are SIX firms pre-selected by your lecturer as this year’s assignment materials. These films are about to list on one of the US stock markets or have applied (filed) for listing.
Whatever the case, the assumption we make in the assignment is that due to weak conditions In the PIP market, these firms decide that they are not actually at the stage or In a time where they should be raising capital on the stock exchange. Instead we assume that they now abandon their PIP plan and consider seeking venture capital/private equity funding instead. Each group should choose ONE firm and prepare the funding proposal/report based on that firm. You should select the firm based on whether Its activity suits your Interests / expertise / knowledge. The background information given to you is in the S-l or F-1 form filed by the company to the SEC, which is essentially a preliminary prospectus.
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You should rely on this Information; however, you must make the assumption that the company is still private firm seeking venture capital funding. So when you rely on the prospectus for information, you must discard details related to the proposed listing (e. G. Invitation to subscribe for shares In a public offer, offer share price, number of shares offered to the public, pro- formal flannel statements, etc. ). However, you can rely on the prospectus’ share offer information to make assumptions about (1) how much money the firm is raising in new capital (excluding issuing costs and amount sold directly by selling shareholders), (2) how the money raised would be used, and (3) the appropriateness of the original prospectus price (If available).
You must also assume that your report proposal is written at some time after the closing date stated in the prospectus. Market and industry conditions at such times should be taken into account. Some of ‘OFF your report is due. In this case, you can consult all available pricing information but this must not be used as input to your valuation. Team Setup: The assignment is a group assignment and must be done in groups of your choice of either 3 or 4 students (inclusive). If you cannot find a group by the end of week 4 then you should email the tutor and he will assign you to a group. You need to be proactive in the tutorial regarding forming a group.
A starting point could be to talk to people that you have known in other subjects. If you do not know many other students, do not be shy about talking to as many other class members as you can. If you find it difficult to catch up with other students, ask your tutor to allocate some time at the end of the class so that all students who have not formalized their groups can Join together and discuss with one another. It is a requirement that all group members must be from the same tutorial class. Contributions and Responsibilities: Group assignments can sometimes attract a free-rider” who fails to make a fair contribution towards the assignment workload.
When you establish your group, you should clearly set out the expectations for workload in your assignment plan. You can also write down the division of tasks among group members and a timeline of agreed due dates for various components of the assignment. All of this information can be used to resolve group conflicts, review individual members’ performance and penalties students who are deemed to have not made a fair and reasonable contribution by the LECTURER. In order to ensure equity in the group, students will be required to complete a ‘cover sheet’ indicating the level of contribution of each student to the assignment, including the number of meetings attended and percentage contribution in three areas: research, synthesis and writing.
This cover sheet will be available on Blackboard before the submission date. All students must sign the cover sheet. Otherwise, a mark of ZERO will be awarded to any student who fails to sign to cover sheet. It is also imperative that all group conflicts are brought to the attention of, first, the tutor, and then, the lecturer early (I. E. As soon as they arise) and that records of all immunization, meeting attendances, submission schedules, and input documents are kept by each group member. In the event of a serious group conflict, where there is disagreement about individual contributions, the lecturer will adjust the marks individually based on this additional information.
Writing your Proposal: You must write a funding proposal for raising the capital to fund your selected firm’s growth opportunities. The proposal should be written for people external to the company, I. E. Managers of a venture capital fund, a private equity fund or a syndicate of funds. You should note that the content, style and level of detail of this type of business plan is different from that of an internal business plan that you would use to run the business. It must market the firm well and provide venture capital funds with the information they need to determine whether they will invest in your firm or not. Your business plan should cover the following topics: 1 . Executive summary / Information memorandum This should be a 1 – 1. 5 page opportunity.
It should contain your recommendation regarding the funding decision, the funding amount, price, and main purposes of funding. . Background Business and product description Current owners Management team, personnel and compensation Market and industry competitiveness analysis Production and operational strategy Use of proceeds 3. Financial analysis and projections Historical financial analysis, including ratio analysis (if necessary) Valuation based on peers and the industry average Key valuation assumptions and how they can be linked to market and strategy analyses Forecasting of future profitability and cash flows Capital budgeting for the investment proposal: analyses of funding requirements and valuation (e. G. Counted free cash flows, AIR, etc. ) Any other valuation techniques considered appropriate for the selected company 4. The deal Pricing and Justification Pre and post-money ownership structures and their implications.