Description
WESTMINSTER BUSINESS SCHOOL
SCHOOL OF FINANCE AND ACCOUNTING
Module title: Corporate Finance
Module code: 6FNCE002W
Assessment title: Financial Strategy and Valuation (CW1)
Assessment weighting: 50%
Assessment deadline: Wednesday 13th November 2024
Assessment format: E-portfolio
Word limit: 2,000 words max OR Presentation length: 10 minutes max
ASSESSMENT BRIEFING
Live Brief
A live brief is a type of assessment where students are presented with a real-life problem by a real-life company. As such, problem-solving skills are at the heart of the learning and assessment. The live brief requires students to go through three steps:
- Meet the client to establish the situation and ask any pertinent questions
- Go away for a number of weeks to work on the issue, using appropriate resources
- Return to the client and present recommendations.
This year, the client is Houlihan Lokey (HL), a boutique investment bank currently advising Chapel Down Group plc (the case) on their financial strategy.
Even though the assessment must be submitted as an individual e-portfolio, most of the work must be completed in teams within your allocated seminar group – including meeting with the client and presenting your recommendations.
The timeline for the live brief assessment is:
– Week 1 seminar: teambuilding and assessment review
– Week 2 lecture: meeting the client (HL) and Q&A
– Week 8 lecture: group presentations to the client (HL) and feedback
– Week 9: submission deadline
The Case: Chapel Down’s strategic review of long-term funding options*
Introduction
Chapel Down is the leading producer of English wine, renowned for its award winning sparkling wines. Over the past two decades, the company has grown from a startup into one of the UK’s most successful winemaking enterprises. Chapel Down’s wines have consistently garnered international acclaim, including prestigious awards at the Decanter World Wine Awards. The company is part-owned by billionaire Lord Michael Spencer and has recently transitioned from the AQSE market to the AIM market, which has raised its profile in the investment community.
Chapel Down is currently undergoing a strategic review to explore long-term funding options that will support its ambitious growth strategy. This strategy includes significant investments in new vineyards and the construction of a state-of-the-art winery, which is expected to be operational by the 2026 harvest. Additionally, the company plans to enhance its brand home in Tenterden to further solidify its market position.
The decision to review funding options comes at a time when the English wine industry is experiencing rapid growth, with increasing international investment and a record-breaking harvest in 2023. Chapel Down aims to capitalize on this momentum by doubling its business size and expanding its production capacity.
Financial performance
Chapel Down has demonstrated robust financial performance in recent years. In the 2023 calendar year, the company reported a 15% increase in revenue, reaching £17.9 million. The firm is on track to achieve double-digit sales growth in 2024, supported by a strong balance sheet and significant headroom in its existing £12 million debt facility. The company has also reached an agreement in principle to extend and increase this facility, providing additional financial flexibility.
Despite these positive indicators, Chapel Down recognizes the need for substantial capital investment to realize its growth ambitions. The strategic review will consider various funding alternatives, including investment from existing and new shareholders, a potential sale of the company, and other relevant transactions.
The Assessment: Groupwork component
As part of this assessment, you – as a team of analysts-to-be – are tasked with helping Houlihan Lokey (HL) advise Chapel Down on the most appropriate long-term funding option(s) based on a thorough analysis of its current financial position, strategic objectives, and market conditions. Your assessment involves evaluating the potential impact of each funding option on the company’s valuation, financial structure, and strategic goals. Your team should consider the following possibilities:
– Mergers and Acquisitions (M&A): Evaluate the potential for Chapel Down to merge with or acquire another company, or to be acquired by a larger entity. Consider the strategic fit, synergies, and valuation challenges associated with such transactions.
– Leveraged Buyout (LBO): Assess the feasibility of a leveraged buyout as a means of financing Chapel Down’s expansion. Analyse the risks and benefits of increasing leverage and the impact on the company’s financial structure.
– Restructuring: Explore options for restructuring the company’s existing operations or financial arrangements to unlock value and support growth. This may include divesting non-core assets or optimizing the capital structure.
– Equity and Debt Financing: Consider the implications of raising additional equity or debt to fund the growth strategy. Evaluate the potential impact on the company’s ownership structure, financial ratios, and cost of capital.
Each team will need to prepare a business-style report (Word/PDF or PPT slides) with recommendations, to be submitted as part of their individual portfolio submission (see below). One team from each seminar group will be selected to present their recommendations to the client (HL) on Monday 11th November. The presentations themselves are not part of the summative assessment, but the feedback provided by the client to the class is.
The Assessment: E-portfolio
Your assessment must be submitted individually as an e-portfolio, and must include the following (25% for each component):
- Pre-recorded Video Presentation (using Panopto): A critical discussion of the most appropriate valuation techniques for Chapel Down. Discuss how these techniques vary depending on the purpose of the funding (e.g., M&A, LBO, restructuring) and the specific context of the wine industry. This should demonstrate a deep understanding of advanced corporate valuation methods and their application to the case study, including references to the compulsory readings, videos and guest lecture, as well as evidence of independent research. The maximum length of the presentation is 4 minutes.
- Business-style Report: A concise report (max 750 words) with recommendations for Chapel Down’s adviser (HL), outlining the preferred funding option(s) and justifying the choice based on financial analysis and strategic alignment. This component is a group effort (see above) and can be submitted in any written format (Word, PDF, PPT, etc.) as long as it doesn’t go over the word limit.
- Supporting Data: All the data (Bloomberg and other data) used in the analysis and recommendations above. This should include relevant financial metrics, industry benchmarks, market trends, Bloomberg exerts, and a bibliography. Ensure to distinguish between the data collected individually and collectively; and that your data is clearly presented, with any assumptions or calculations fully explained (maximum 200 words).
- Reflective Commentary: A personal reflection on the skills developed during the assessment process, including the group activities. This component should demonstrate graduate skills such as financial analysis, problem[1]solving, and communication skills, and must be submitted as a journal with 5 different entries (5% each) each covering a different group activity. The maximum word count for this component is 500 words. The 5 group activities you must reflect on are:
1) Meeting with the client
2) Discussing the firm’s overall strategy
3) Discussing the firm’s financial performance
4) Discussing the firm’s growth and funding strategy
5) Discussing the client’s feedback and overall work experience
Note: your final journal entry must include, as part of your reflection, a copy of your most recent CV, or a link to (or screenshot of) your LinkedIn page, where you talk about this work experience using the STAR method: Situation, Task, Action, and Result. The attached CV (if applicable) does not count in the word limit.
ASSESSMENT CRITERIA
The assessment criteria and weightings show you what is important in the assessment and how marks are shared across each criterion. When you are completing your assessment remember you need to fulfil the brief and the assessment criteria below.
Criterion
Weighting Pre-recorded video presentation:
Critical discussion of valuation methods 25%
Business-style report with recommendations 25%
Supporting data 25%
Reflective commentary – Journal entries (5 x 5%) 25%
Total 100%
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