The document outlines the requirements for a team project to identify potential acquisition targets for a company pursuing a strategy of horizontal integration. The team must: 1) Select two potential target companies from the same industry for preliminary analysis. This includes qualitative research on company backgrounds and quantitative financial analysis. 2) Prepare a report of findings recommending one target to pursue for further due diligence. The report must include analysis, interpretations, and a well-supported recommendation. 3) Create a PowerPoint presentation to present the recommendation to the board, dressing in business attire and actively delivering the content.

1. Team Project Deliverable and Presentation
You team works for XYZ Company, which has a directional
strategy focused on expanding the company through horizontal
integration. Your team can determine the official name of the
company and industry. The company does a great job keeping
close watch on its cash position and consistently maintains a
positive cash flow; is very solvent; controls its overhead
expenses; has solid marketing and sales, production, and human
resources performance metrics, and fosters a culture of strategic
thinkers. Historically, your company has expanded through a
combination of organic (new startups) and inorganic growth and
feels it’s time to consider acquisition opportunities.
The Board is looking to engage in a friendly acquisition of a
company that will not only increase its market share, but allow
it to penetrate new markets and increase the company’s abilities
to meet current and future consumer needs and expectations.
Since management’s attitude is to pursue a friendly acquisition
as opposed to a hostile takeover, your team may consider
looking at conglomerates that have experienced significant
growth through inorganic growth (acquisitions) and may now be
looking to refocus on their core business and are willing to
consider divesting some of its businesses that are within your
industry. There could be other companies that are under
financial duress and receptive to acquisition offers. Your team
is a part of the corporate mergers and acquisition (M&A)
department and has been assigned the task of identifying two
potential acquisition targets. Since your Board is committed to a
strategy of horizontally integration, you will be looking for
possible acquisitions from within your industry. You will be
performing a preliminary analysis of the companies under
consideration, and then ultimately recommend one of the
companies move forward for a more in-depth valuation by M&A

2. Department.
Notes: The target acquisitions should be publicly traded and
have the same fiscal year end, preferably December 31st. In
addition, your team is encouraged to select a proper name for
your company and the industry for which it is aligned.
To successfully complete your preliminary analysis of the target
acquisitions, your team should follow this high level process
flow:
1. Select Comparable Companies that Satisfy Inclusion Criteria
2. Conduct Qualitative Research on the Companies
3. Conduct Quantitative Analyses of the Companies (financial)
4. Prepare Report of Findings with Recommendation
Select Comparable Companies
Describe the methodology used to select the target acquisitions.
You may want to consider utilizing the North American
Industry Classification System (NAICS) to identify companies
within you r industry. Of course, there are a variety of Internet
sites that can assist you in locating firms within your chosen
industry, such as Google Finance and Yahoo Finance.
Conduct Qualitative Research on the Companies
Provide relevant background information on the each company,
current forces affecting its operations, and its expectations for
future years. The management discussion and analysis (MD&A)
section of the company’s annual report will be a useful source
for this type of information. In addition to the companies’
annual report, the teams may look at pulling current articles

3. about the companies from the databases available through the
University Library. There are a number of credible sources
where this type of information can be obtained through the
Internet.
Caution: It is dangerous to rely solely on the opinions and
perceptions expressed by agents of a firm, since they may have
a tendency to present an overly optimistic picture of the current
state and future of their companies. After all, they have
shareholders that pay close attention to their words and actions.
It would be prudent to verify information through non-agents of
the companies, such as financial and investment analysts who
closely track the industry as well as media outlets that closely
monitor and report on companies within the U. S. economy. It is
understood that the opinions expressed by these sources are
subject to bias regardless of how objective they attempt to be.
The objective is to validate the information you obtain through
more than a single source. This is a practice that all
management officials should make a habit.
The teams will be expected to qualitatively analyze the content
within the companies’ most recent independent audit of its
financials and records. In performing this analysis, the teams
should focus on the audit findings and options.
Conduct Quantitative Analyses of the Companies (financial)
1.Present a comprehensive financial statement analysis of the
target acquisitions. Prepare the common size statements and all
the ratios and amounts for the measures given below for the
most recent year for both of your companies and present in a
clear tabular form. Then discuss each category given below.
◦Prepare common-size financial statements for both target
acquisitions
◦Complete both a horizontal and vertical analysis for each target
acquisition
◦Compare the common-size financial statements between the

4. two companies using cross-sectional analysis
◦Calculate and interpret relevant profitability, solvency,
liquidity, leverage, market value ratios for each company that
will be useful in comparing the target acquisition
2.For each company, graphically trend the net income and cash
flow from operations over the last five years. Based on a
comparison of the income statement to the statement of cash
flows, what accounts explain the greatest differences between
net income (loss) and cash flow from operations. Comment on
the quality of the earnings numbers.
3.Calculate and interpret the net present value (NPV) of the
companies’ annual free cash flow (FCF) for a 5 year period
(nper) taking into account a constant growth rate (which will
need to be calculated), and a discount rate that is equal to your
companies weighted average cost of capital (WACC), which is
7%. http://www.investopedia.com/articles/fundamental-
analysis/11/present-value-free-cash-flow.asp (Links to an
external site.)Links to an external site.
4.Any notable similarities and differences in financial reporting
practices of the two acquisition targets that could potentially
impact your analysis should be reported along with your team
mitigation strategy. For example, perhaps the firms are using
the same or different methods of accounting for property, plant,
and equipment (PP&E), inventory, intangibles, etc.
The team will perform all numeric calculations using
Microsoft™ Excel. Excel can be used to graphically present
data, and then copied and pasted into the Report of Findings
(see below) or this can be directly in the Word document using
the Microsoft™ charting feature.
For both blended students and online students, the spreadsheet
will need to be uploaded along with the Report of Findings by
Friday of Unit 8, no later than 11:59 p.m. (CT).

5. Report of Findings with Recommendation (160 points)
The team will prepare a Report of Findings that addresses, at a
minimum, the following content: background information on the
project (not the target acquisitions) as assigned to your team by
the M&A Department of your company; describe the
methodologies and assumptions used in the selection of the
target acquisitions as well as the qualitative and quantitative
analyses of company data; present your results with accurate
interpretations; conclusions; and finally recommend on which
company should be forward to the M&A Department for more
in-depth valuation analysis (due diligence). The
recommendation needs to be well-supported, properly vetted,
and logically presented.
The team will be expected to comply with the APA (6th edition)
form and style standards when in-text citing sources and listing
these sources in the list of references; however, all other APA
standards are suspended for purposes of completing this
deliverable. It is expected that the team will use sound judgment
and professional creativity in the design, layout, and
presentation of the content within the report. Any graphs used
to present financial data can be created in Microsoft™ Excel,
and then copied and pasted into the report OR the graphs can
simply be created directly in the Word document using the
Microsoft™ charting feature.
There are no prescribed page limits associated with the report.
Keep in mind, the team will be expected to provide a great deal
of specificity in terms of how the numeric calculations were
performed, the underlying assumptions, and in the interpretation
of results. The content throughout the report must be
substantive, thorough, and comprehensive; explicitly address
the requirement components (described in prior sections);
reflective analysis, syntheses, and evaluation of relevant
qualitative and quantitative data; and demonstrate the overall

6. quality consistent with that expected of an industry
professional.
You are also required to prepare an Executive Summary which
is to accompany the Report of Findings. The Executive
Summary can be physically positioned at the beginning of the
Report for convenience. This is a common practice within
industry. The Executive Summary like the Report of Findings
should show good judgment and professional creativity in terms
of design, layout, and content. Any graphs used to present
financial data can be created in Microsoft™ Excel, and then
copied and pasted into the report OR the graphs can simply be
created directly in the Word document using the Microsoft™
charting feature.
For both blended students and online students, the spreadsheet
will need to be uploaded along with the Report of Findings by
Friday of Unit 8, no later than 11:59 p.m. (CT).
Team PowerPoint and Presentation Description (62 points)
There is NO prescribed number of slides that must be contained
within the slide deck. Specific criteria for the successful
completion of the presentation (slides and oral delivery) are
clearly laid out within the presentation rubric. All participants
are expected to dress in acceptable business attire and actively
present content to the audience.
•Blended students will deliver their presentation in the
classroom before a live audience during the seventh week of the
term.
•Online students will deliver and record their presentation using
the Canvas conferencing feature before a live, remote audience.
The PM will need to ascertain a date and time that will
maximize audience participation. The Canvas recording of the
presentation is to be archived by Sunday, at 11:59 p.m. (CT) of
Unit 7.

7. Conduct Quantitative Analyses of the Companies (financial)
Company 1: Verge Genomics
Company 2: Healx
1. Present a comprehensive financial statement analysis of the
target acquisitions. Prepare the common size statements and all
the ratios and amounts for the measures given below for the
most recent year for both of your companies and present in a
clear tabular form. Then discuss each category given below.
◦Prepare common-size financial statements for both target
acquisitions:
◦Complete both a horizontal and vertical analysis for each target
acquisition
◦Compare the common-size financial statements between the
two companies using cross-sectional analysis
◦Calculate and interpret relevant profitability, solvency,
liquidity, leverage, market value ratios for each company that
will be useful in comparing the target acquisition
2. For each company, graphically trend the net income and cash
flow from operations over the last five years. Based on a
comparison of the income statement to the statement of cash
flows, what accounts explain the greatest differences between
net income (loss) and cash flow from operations. Comment on
the quality of the earnings numbers.
3. Calculate and interpret the net present value (NPV) of the
companies’ annual free cash flow (FCF) for a 5-year period
(nper) taking into account a constant growth rate (which will
need to be calculated), and a discount rate that is equal to your
companies weighted average cost of capital (WACC), which is
7%. http://www.investopedia.com/articles/fundamental-
analysis/11/present-value-free-cash-flow.asp (Links to an
external site.)Links to an external site.

8. 4. Any notable similarities and differences in financial reporting
practices of the two acquisition targets that could potentially
impact your analysis should be reported along with your team
mitigation strategy. For example, perhaps the firms are using
the same or different methods of accounting for property, plant,
and equipment (PP&E), inventory, intangibles, etc.