Anthony Thompson
Strategic Investment Appraisal
19th April 2021
Summative Assessment
Anthony Thompson
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Anthony Thompson
Abbreviations
JET – Just Eat Takeaway
NPV – Net Present Value
DCF – Discounted Cash Flow
GDP – Gross Domestic Product
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Contents
Executive Summary................................................................................................................................. 4
Details of the acquisition ........................................................................................................................ 5
Business Valuation Using Discounted Cash Flow Method ...................................................................... 5
A potential rival bidder ........................................................................................................................... 6
Business Valuation Methodology ........................................................................................................... 7
Conclusion ............................................................................................................................................... 9
References ............................................................................................................................................ 10
Appendix ............................................................................................................................................... 12
Appendix 1: Discounted Cash Flow Analysis of GrubHub ................................................................. 12
Notes on assumptions................................................................................................................... 12
Appendix 2: Weekly Learning Logs ................................................................................................... 15
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Anthony Thompson
In June of 2020, Just Eat Takeaway, a European food delivery conglomerate secured a takeover of
American food delivery service GrubHub. The deal has certified Just Eat Takeaway as the largest food
delivery organisation outside of China and provided the European company a window into the
growing US market (Partridge, 2020). Just Eat Takeaway now operate in 23 different countries,
showing an increasingly globalised presence (Just Eat, 2021a).
Executive Summary
The global value of online food delivery is projected to reach $151.5bn in 2021 and $182.3bn by
2024, with an average annual growth rate of 6.36% (Statista, 2021a). The platform-to-consumer
space of this market (involving companies such as Deliveroo and Uber Eats) is currently projected to
reach $79.6bn in 2021 (Statista, 2021a). Just Eat Takeaway operate in both food ordering and home
delivery sectors. Figure 1 shows projected global food delivery value in the future.
Figure 1
Source: Business of Apps, 2021
The timing of the takeover deal is interesting given the effects of the global COVID-19 pandemic on
the food delivery market (Partridge, 2020). Hospitality has been one of the hardest hit sectors during
the current worldwide lockdowns (Mintel, 2021). The pandemic has, however, sped up digital
transformation and adoption of third-party food delivery platforms. Many restaurants have been
forced into adopting digital transformation to take advantage of the only source of business
available to them during the pandemic – home delivery (Mintel, 2021).
The competitor landscape at present in this field is rife. Just Eat Takeaway’s main competitors in
Europe are Deliveroo, Uber Eats and Delivery Hero. GrubHub competes closely with Doordash, Uber
and Postmates. What is interesting is that all these companies made losses in 2019 (Sterling &
Sandle, 2020). The strategy of this industry is to grow fast and acquire as many customers as
possible. Once dominance is attained in a market, competitors can be pushed out and profit margins
raised. This is a common strategy amongst technology platforms and streaming services. For
example, Spotify and AirBnb have largely run at a loss in recent years with a focus on growth,
customer acquisition and entry into new markets. The various benefits from synergies and
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economies of scale are considered worth the potential financial risk. With this in mind, it is possible
that acquiring a company in a new market could be a more cost-effective way of gaining new
customers (and enjoying the associated benefits) than trying to overtake and outperform
competitors. Size is important (Sterling & Sandle, 2020).
This essay will assess the validity of the takeover bid, undertake a DCF analysis of the financial
aspects of the deal, look at valuation methods from a critical standpoint and will look at a potential
rival bidder and explain how the scenarios could be different from a strategic analysis perspective.
Details of the acquisition
The takeover bid was enormously complex for Just Eat Takeaway. The decision involved entering a
new country which brings its own complexities and challenges of cultural differences. The potential
failures involved in new market entries are extreme.
The snapshot financial details of the food delivery industry show a healthy and expanding industry
(Figure1).
Platform-to-consumer delivery services, such as Just Eat Takeaway, that handle delivery logistics
require a more cost-intensive business model. It is imperative, therefore, that the platforms
continue to grow at healthy rates and benefit from synergies, new markets, and economies of scale.
The capital-investment decision making process involves more than just financial analysis. Steps
before and after financial analysis, including screening and post auditing, are also involved to make
sure that the project is a good fit and helps maximise wealth and promoting organisational goals for
the company (Gotze, 2015).
Revenue
Active Diners
Current Assets
Current Liabilites
Cash
(Figure, 2)
General Overview of Grub Hub
2019
2018
1,312,151
1,007,257
22,621,000
17,688,000
566,317
363,775
249,363
223,168
375,909
211,245
Growth
+30%
+27%
+56%
+12%
+78%
(GrubHub, 2019)
A quick look at snapshot financials of GrubHub show healthy and expanding organisation with good
historic growth figures.
Business Valuation Using Discounted Cash Flow Method
Discounted Cash Flow
The valuation methodology used in the case scenario is the Discounted Cash Flow. The discounted
cash flow is a dynamic investment appraisal method, which considers more than one time-period
and acknowledges the time value of money (Gotze, 2015). The calculations of the discounted cash
flow show a preference for receiving income or consuming resources at a particular time. This
method is commonly used in business acquisitions as it takes into consideration the depreciating
effects of time on value (Gotze, 2015).
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The bid price of $7.3 billion was reasonably well received by the market, as GrubHub shares rose to
9% in after hours trading before settling at +6.2% above the closing price. Meanwhile JET stock fell
10.79% and Uber share fell 4.81% (Lunden & Korosec, 2020).
The discounted cash flow provides an estimated bid price by looking at the potential future cash
flows. It is likely that the cost of capital will decrease from the acquisition due to the benefit of
synergies and reduction in business risk (Watson & Head, 2013). Please see Appendix 1 for more
details.
Risk Free Rate
Risk free rate was set at 1.01% to reflect the yield on US treasury bonds in 2020.
Perpetuity Growth Rate
This rate was set at a high 5% despite decreases in USA GDP growth rates in 2020. The growth
potential of food delivery is high and so warrants a higher perpetuity growth rate (Statista, 2021b).
Asset-based
This method utilises information on Grub Hub Assets from the financial statement.
2020
Total Assets
Total Liabilities
Net Asset Value (Total Assets - Total Liabilities)
Bid Price
Difference
(Figure 3)
2,374,978
881,408
1,493,570
7,300,000
5,806,430
(GrubHub, 2019)
Asset based methodology is useful as it is simple to understand but limited in its accuracy. Figure 2
and Figure 3 show healthy growth potential based of historic values. There are, however, many
shortcomings involved. Historic numbers do not always accurately predict future potential (Watson
& Head, 2019). The depreciating effect of time on assets such as property and equipment are also
neglected. Property prices fluctuate and so often need to be re-valued at the time of a bid.
A potential rival bidder
A potential rival bidder was Uber Eats. Launched by Uber in 2014 (as UberFRESH), UberEATS is a
large food delivery chain with a 2019 revenue of around $4.8 billion and 21 million monthly active
users (compared with GrubHub’s 22.6 million and JET’s 48 million) (GrubHub, 2019) (JustEat
Takeaway, 2020). From capitalising on its recognisable brand name and established global driver
network, Uber manged to grow its food delivery service dramatically and quickly surpassed rival
GrubHub in 2016 in terms of active users (Dixons, 2017).
The bid price for Uber Eats would be naturally lower as they are already operational in the same US
market as GrubHub. Just Eat, by expanding into the US market would expect to realise greater
financial gains by benefitting from economies of scale. The takeover will aim to take advantage of
synergies. There are three main benefits of synergies in acquisitions, these are enhancement of
revenue, reduction in operating costs, and reduction in capital costs. The takeover will benefit from
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all three. Huge savings in time and efficiency can result from this in the long term. For example, a
reduction in operating costs will be achieved through the pre-existing infrastructure of GrubHub. If
JET chose to compete in the USA as their own brand (without acquiring an established player) they
may experience difficulties in terms of gaining brand recognition and establishing a driver network.
International expansion can have its own cultural issues. These issues will be minimised by the
takeover.
There are certain risks of UberEATS acquisition of GrubHub. They would be operating in the same
industry, in the same geographical market and would not benefit from economies of scale in the
same way as Just Eat. GrubHub is a geared company and therefore Uber would take on a certain
amount of debt. GrubHub’s gearing ratio was .33 for 2019, whereas Uber’s was .38, so it is unlikely
that Uber would have concerns about taking on too much debt from the acquisition (GrubHub,
2019) (Uber, 2020).
Furthermore, Uber is an American company and would be acquiring a competitor on its own turf and
further consolidating its power in the market. This may lead to concerns of over-dominance by antitrust regulators (Browne, 2020).
Business Valuation Methodology
Company valuation are often seen as more of an art than a science. High profile strategic investment
projects have huge impact on long-term corporate performance and involve considerable risk. The
outcomes of investment decisions are often speculative and hard to quantify (Alkaraan & Northcott,
2013). Valuation methods exist to predict the future value and profitability of an investment but, as
with any predictions of the future, are limited in accuracy and depend highly on the quality of the
data used (Watson & Head, 2017).
The information contained within valuation methods such as the DCF is purely financial. Many other
factors are involved in determining the long-term value of a project or an acquisition. Valuation
methods largely fall under two categories: asset based, and earnings based. Both methods have pros
and cons, and neither can give a perfect estimation of future value. A reliance on general
assumptions caused inaccuracies. When using asset-based methodologies, balance sheet values can
be used to identify the value of net assets. This can cause issues as balance sheet values are historic
costs and depreciate over time decreasing their usefulness (Watson & Head, 2017). Property costs
can vary considerably over time and so a revaluation is sometimes necessary. Fluctuation in property
prices, inventory level changes, off-balance sheet assets (such as leased property/equipment) and
intangible factors (such as goodwill) are not reflected in the balance sheet and can cause
fluctuations in the overall value (Watson & Head, 2017).
With earning based methodologies, it is unknown whether the future earnings will grow or decrease
at the same rate as in the recent past. The growth rate is not always predictable especially if growth
rates have been volatile, some businesses may come to different conclusions and adapt their
valuation accordingly. There is also a chance that the acquisition will affect turnover margins in the
target company, brand image and perception can come into play here causing a change in perceived
value from different acquiring companies (Watson & Head, 2017).
Capital investment planning requires more than financial analysis and depends on a complimentary
and effective decision-making process. All major factors that affect current and future strategy
should be considered. The incorporation of non-financial and elements to decision making allows for
comparison and ranking against other potential projects.
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In a study undertaken via survey data from directors of manufacturing companies it was found that
strategic investment decision making is less normative than literature suggests and is very much
affected by contextual factors (Alkaraan & Northcott 2013). In this way, valuation methods lack an
adaptive model to incorporate non-financial factors. The study suggest that political factors and
strategy formulation are as important as rational financial analysis in decision making (Alkaraan &
Northcott 2013). Strategy dictates the kinds of products, markets and technologies the organisation
wants to invest in so a screening process and formal analysis is also appropriate. It is important to
consider that this can often lead to timing delays and inflexibility in investment execution and
sometimes cause missed opportunities (Gotze, 2015).
A study has shown that although widely used there is significant variation in how the DCF is applied
and how the weightings are assigned when dealing with segmented markets. Furthermore, as the
complexity of the markets and business value drivers increases, the dependence on conventional
rules of thumb and heuristics increases (Keck, Levengood, Longfield, 2005).
There are external factors that affect the DCF methodology and its effectiveness including changes
to the risk-free rate and the premium that investors require above this rate. DCF valuations are
incredibly sensitive to changes in underlying assumptions. Recently, interest rates have been at
historic lows which have prompted low discount rates in DCF models across industries. It has been
observed that low interest rates have a huge impact on the NPV of companies and increase their
long-term value considerably (Mendell, 2020). For example, it has been observed that changes of as
little as 1.5-2 percentage points in real long-term interest rates can boost the market prices of
technology companies such as Amazon and Apple by as much as 50%, other things being equal
(Plender, 2021). An increasingly small amount of the NPV is determined by its estimated financial
performance in the near-term (Financial Post, 2016). With this is mind, it is important to note that
events in the future will have a greater comparable effect on current NPV than with a high discount
rate. So, the wider economic conditions are worth considering when assessing the impact of time on
value. Concerns over the sustainability of historically low interest rates could also affect discounted
valuation methods and may require additional risk premiums. Some have stipulated that the
discounted methodologies such as DCM were invented at a time where risk free rates averaged 5%.
In a world where they are close to zero the errors involved are exaggerated.
Profitability can be either relative or absolute. One of the drawbacks of the Net Present Value
methodology, including DCF, is that the success of the investment is determined by the size of the
NPV. This can often cause a bias towards larger projects, as they naturally create a larger NPV. The
internal rate of return combats this shortcoming by analysing the relative performance of projects
irrespective of project size.
What makes the effectiveness of valuation methods even more difficult to judge is how to evaluate
success after the acquisition has been made. Success is commonly measured by the immediate stock
market reaction, but success can also be measured by progress made towards strategic goals and
non-financial milestones (Harris, 2007). Sustainability issues can have a huge impact on stock market
perception as consumer interest comes into play. Sustainability and ethics affect all players in the
market, no one is exempt. Constant adaptation and consideration of stakeholders is necessary to
achieving sustainability (Harris, 2021). Incorporating large and comprehensive sustainability
strategies within a company can be challenging for businesses when designing MAC systems for
sustainability (Beausch, 2020).
A common theme throughout the literature published on valuation methods and practices is that
the classifications of business value drivers are inconsistent and inefficient to adequately describe
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specific business value drivers. It is difficult to measure the interrelations between value drivers and
difficult to quantitatively measure the impact of drivers of change on business value (Kazlauskienė,
Christauskas 2008).
Conclusion
The case study scenario of JET’s acquisition of Grubhub in 2019 provides a look at the use of
valuation methods to inform strategic decision making. Valuation methods, including asset based
and earnings based, Net Present Value and Discounted Cash Flow, are useful in determining the
future potential value of an asset or an investment decision.
Many different factors are involved in valuing a company. We have explored this through looking at
the bid through the eyes of a competitor, Uber. Uber, as they are already operable in the same
market do not stand to gain as many benefits from the deal as JET. Further, issues over dominance
and trust must be considered.
These valuation methods are widely used and respected, but they are limited. The limitations are
especially clear when incorporating non-financial features into an investment decision that could
affect the future value. There are a wide range of possible influences that could affect the value of a
project from sustainability issues to potential project failures, and cultural integration issues. These
factors can make or break a project and are incredibly difficult to quantify when analysing the value
of an investment decision. These factors cannot be ignored, especially in a modern climate where
businesses that are seen as having strong values in sustainability and ethics and seen to be making a
contribution to society are better placed to do well and build a brand image.
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References
1. Alkaraan, F. and Northcott, D. (2013), "Strategic investment decision-making processes: the
influence of contextual factors", Meditari Accountancy Research, Vol. 21 No. 2, pp. 117-143
2. Beusch, P. (2020). Integrating management accounting and control for sustainability.
Accounting for Sustainability. (4), pp51-72.
3. Browne, J. (2020). What you need to know about the European food delivery giant that beat
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https://www.businessofapps.com/data/food-delivery-app-market/. Last accessed 19th April
2021.
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19th April 2021.
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Available: https://financialpost.com/investing/a-critical-idea-in-valuing-stocks-is-beingmade-obsolete-by-low-rates. Last accessed 19th April 2021
7. Gotze, U (2015). Capital Budgeting and Investment Decisions. In: Schuster & Northcott
Investment appraisal: methods and models. London: Springer. p10
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2021.
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Last accessed 19th April 2021.
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18. Mintel. (2021). Attitudes towards Home Delivery and Takeaway. Available:
https://reports.mintel.com/display/1069383/?fromSearch=%3Ffreetext%3Ddeliveroo. Last
accessed 19th April 2021
19. Morgan Stanley. (2020). Can Food Delivery Apps Deliver Profits for Investors? Available:
https://www.morganstanley.cohttps://www.morganstanley.com/ideas/food-delivery-appprofitsm/ideas/food-delivery-app-profits. Last accessed 19th April 2021.
20. Partridge. (2020). Just Eat beats Uber to snap up Grubhub for £5.8bn. Available:
https://www.theguardian.com/business/2020/jun/11/just-eat-uber-grubhub-takeover-fooddelivery-service. Last accessed 19th April 2020.
21. Plender, J. (2021). Pension funds pay the price for bond market distortions. Available:
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April 2021.
22. Statista. (2021a). Online Food Delivery. Available:
https://www.statista.com/outlook/dmo/eservices/online-food-delivery/worldwide. Last
accessed 19th April 2021
23. Statista. (2021b). Gross domestic product (GDP) of the United States from 1990 to 2020.
Available: https://www.statista.com/statistics/188141/annual-real-gdp-of-the-united-statessince-1990-in-chained-us-dollars/. Last accessed 19th April 2021.
24. Sterling & Sandle. (2020). Just Eat Takeaway's $6 billion Grubhub grab tests growth limits.
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accessed 19th April 2021.
27. Watson & Head (2019). Corporate Finance. 8th ed. London: Pearson. p369-377.
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Appendix
Appendix 1: Discounted Cash Flow Analysis of GrubHub
Risk free rate
Market risk premium
Beta from Bloomberg
Market cap
Corporate tax rate
Unleveraged beta
Beta of debt
Cost of debt
Leveraged beta
Cost of equity
1.01%
5.60%
1.34
21.00%
Sum of discounted FCF (2017-2027)
Terminal value
EV
Net debt
Equity value
1,458,649
7,014,597
_____
8,270,521
493,009
_____
7,777,512
0.065
8.51%
Perpetuity growth rate
5.00%
Wacc
8.00%
Notes on assumptions
Notes
NOPAT
CAPEX
Net Debt
US Avg Risk Free Rate Source
US Avg Market Risk Premium
Source
Beta from Bloomberg
US Corp Tax Rate
Cost of Debt (average)
Cost of Debt (Industry average)
Cost of Debt (company)
Working Capital
EBIT
EBITDA
EBIT-Interest+corp tax
Purchases of Property & Equipment
Long Term Debt
https://www.statista.com/statistics/698047/yield-on10y-us-treasury-bond/
https://www.statista.com/statistics/664840/averagemarket-risk-premium-usa/
http://people.stern.nyu.edu/adamodar/New_Home_Pag
e/datafile/wacc.htm
https://www.taxpolicycenter.org/briefing-book/howdoes-corporate-income-taxwork#:~:text=The%20United%20States%20imposes%20a
,from%209%20percent%20in%202017.
March 2020 Interest rate, Standard Cost of Debt (0.65%)
Statista
3%
r(1-t)
Current Assests - current Liabilties
Operating Profit
EBITDA was selected over adjusted EBITDA as the annual
report suggests limitations to using the adjusted figures.
These limitations include adjusted EBITDA does not
reflect cash expenditure for capital equipment or capital
expenditure requirements for depreciated and amortized
assets.
12
(19,666)
140,607
14%
WCR
WCR / sales
78,034
85,940
(43,033)
(140,607)
_____
(19,666)
Free Cash Flow
Disccount period
Discounted FCF
98,983
51,848
(18,971)
316,954
24%
(24,828)
115,449
(55,167)
(176,347)
_____
(140,893)
0.00
(140,893)
396,876
24%
222,190
144,560
(92,629)
(79,922)
_____
194,199
1.00
179,809
476,894
24%
266,988
173,706
(130,091)
(80,018)
_____
230,586
2.00
197,680
548,943
24%
307,324
199,950
(167,553)
(72,049)
_____
267,672
3.00
212,471
495,366
476,396
453,711
449,536
428,130
389,018
337,959
281,253
(6,283)
20493
(81,694)
(70,971)
(59,063)
1,948
21.00%
21.00%
21.00%
31.00%
84,963
3530
(3,399)
4.00%
89,750
102
8,975
-10.00%
EBIT (Operating Profit)
Interest
(Corporate tax)
Corporate tax rate
NOPAT
D&A
(Net capex)
(DWCR)
249,751
8.8%
242,477
8.8%
230,931
8.8%
231,055
8.8%
220,053
8.8%
199,950
8.8%
173,706
8.8%
144,560
8.8%
115,449
8.8%
85,940
8.5%
51,848
7.6%
(D&A)
D&A / sales
604,133
24%
338,222
220,053
(205,015)
(55,190)
_____
298,070
4.00
219,068
634,340
24%
355,134
231,055
(242,477)
(30,207)
_____
313,505
5.00
213,339
633,998
24%
358,431
230,931
(279,939)
342
_____
309,765
6.00
195,175
665,697
24%
376,353
242,477
(242,477)
(31,700)
_____
344,653
7.00
201,066
685,668
24%
391,339
249,751
(249,751)
(19,971)
_____
371,369
8.00
200,599
(95,279) (100,043) (104,027)
(94,403)
(89,907)
21.00%
21.00%
21.00%
21.00%
21.00%
245,615
9%
233,919
8%
222,780
8%
218,481
8%
208,077
8%
189,068
8%
164,253
8%
136,693
8%
109,166
8%
170,903
17%
141,598
21%
Recurring
Soft landing
Achieved Results
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2,501,037 2,626,089 2,624,673 2,755,906 2,838,583
683,067 1,007,257 1,312,151 1,643,020 1,974,283 2,272,556
3%
5%
0%
5%
10%
15%
20%
25%
30%
47%
EBITDA
EBITDA margin
Sales
Growth rate
Amounts in € million
Anthony Thompson
13
WCR
WCR / sales
140607
=C42/C18
316954
=D42/D18
=D27-D28+D29
=D24
-55167
=-(D42-C42)
_____
=SUM(D32:D35)
0
=C37/(1+$B$14)^C38 =D37/(1+$B$14)^D38
98983
=B24
-18971
NOPAT
D&A
(Net capex)
(DWCR)
Free Cash Flow
Disccount period
Discounted FCF
=-L27*L30
0.21
=-K27*K30
0.21
=-J27*J30
0.21
=-I27*I30
0.21
=-H27*H30
0.21
=-G27*G30
0.21
=-F27*F30
0.21
=-E27*E30
0.21
=E43*E18
=D43
=F43*F18
=E43
=G43*G18
=F43
=H43*H18
=G43
=I43*I18
=H43
=J43*J18
=I43
=K43*K18
=J43
=L43*L18
=K43
=L27-L28+L29
=L24
=-L33
=-(L42-K42)
_____
=SUM(L32:L35)
=K38+1
=L37/(1+$B$14)^L38
=L21+L24
=K21+K24
=J21+J24
=I21+I24
=H21+H24
=G21+G24
=F21+F24
=E21+E24
-6283
20493
=-D27*D30
0.31
84963
3530
=-C27*C30
0.04
89750
102
=-B27*B30
-0.1
EBIT (Operating Profit)
Interest
(Corporate tax)
Corporate tax rate
=K27-K28+K29
=J27-J28+J29
=I27-I28+I29
=H27-H28+H29
=G27-G28+G29
=F27-F28+F29
=E27-E28+E29
=K24
=J24
=I24
=H24
=G24
=F24
=E24
=I34+($K$34-$D$34)/5=-K33
=D34+($K$34-$D$34)/5=E34+($K$34-$D$34)/5=F34+($K$34-$D$34)/5=G34+($K$34-$D$34)/5=H34+($K$34-$D$34)/5
=-(K42-J42)
=-(J42-I42)
=-(I42-H42)
=-(H42-G42)
=-(G42-F42)
=-(F42-E42)
=-(E42-D42)
_____
_____
_____
_____
_____
_____
_____
=SUM(K32:K35)
=SUM(J32:J35)
=SUM(I32:I35)
=SUM(H32:H35)
=SUM(G32:G35)
=SUM(F32:F35)
=SUM(E32:E35)
=J38+1
=I38+1
=H38+1
=G38+1
=F38+1
=E38+1
=D38+1
=E37/(1+$B$14)^E38 =F37/(1+$B$14)^F38 =G37/(1+$B$14)^G38 =H37/(1+$B$14)^H38 =I37/(1+$B$14)^I38 =J37/(1+$B$14)^J38 =K37/(1+$B$14)^K38
=L25*L18
=K25
=K25*K18
=J25
=J25*J18
=I25
=I25*I18
=H25
=H25*H18
=G25
=G25*G18
=F25
=F25*F18
=E25
=E25*E18
=D25
115449
=D24/D18
85940
=C24/C18
51848
=B24/B18
(D&A)
D&A / sales
=C27-C28+C29
=C24
-43033
=-(C42-B42)
_____
=SUM(C32:C35)
245615
=L21/L18
233919
=K21/K18
222780
=J21/J18
218481
=I21/I18
208077
=H21/H18
189068
=G21/G18
164253
=F21/F18
136693
=E21/E18
Recurring
2027
=K18*(1+L19)
0.03
109166
=D21/D18
Soft landing
2026
2025
2024
2023
2022
2021
2020
=J18*(1+K19)
=I18*(1+J19)
=H18*(1+I19)
=G18*(1+H19)
=F18*(1+G19)
=E18*(1+F19)
=D18*(1+E19)
=I19-($D$19-$K$19)/5=B12
=D19-($D$19-$K$19)/5=E19-($D$19-$K$19)/5=F19-($D$19-$K$19)/5=G19-($D$19-$K$19)/5=H19-($D$19-$K$19)/5
170903
=C21/C18
Achieved Results
2019
2018
1312151
1007257
=D18/C18-1
=C18/B18-1
141598
=B21/B18
2017
683067
EBITDA
EBITDA margin
Sales
Growth rate
Amounts in € million
Anthony Thompson
14
Anthony Thompson
Appendix 2: Weekly Learning Logs
Name: Anthony Thompson Session: Week 2 Date: 28th Jan 2021
Experience: What happened? What did you discover (topics covered)?
•
•
•
•
Achieved a clearer outline of the assignment expectations.
Looked at strategic analysis and rationales for different types of project.
How the Tesla Model 3 came to market. How the money was raised. Who is involved and
effected by the new vehicle? How a global project such as the Model 3 is structured and
some of the benefits/limitations involved.
An insight into the thought process behind launching a new piece of technology to the
market such as the Dyson Robotic Vacuum Cleaner.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
It was useful to look at new product launches from a strategic perspective.
When analysing the viability of a project such as the Dyson Robotic Vacuum, many different
aspects are considered. Such as pricing, competitor landscape, potential earnings, market
size.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
I learned how a new product is a result of a strategic plan and involves many different
variables and considerations.
On top of meeting the needs of the consumer or launching a piece of technology many other
aspects come in to play when launching a new product. Some of these include, cost analysis,
scale of the project, stakeholder consultation.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
•
•
It will give me a broader view of what the requirements are when considering New Product
Development and bringing to market.
I will help me to consider the value a new product or service will bring to the market, the
stakeholders involved and how they should be catered towards, and how the project will be
funded.
Aspects such as product portfolio analysis, customer needs, and market intelligence.
15
Anthony Thompson
Name: Anthony Thompson Session: Week 3 Date: 4th Feb 2021
Experience: What happened? What did you discover (topics covered)
•
•
•
We looked at what information is needed to appraise takeovers and make a good business
valuation.
We looked at assessment of a project viability and strategic direction with regards to M&A
as opposed to NPD or business operations.
We transferred this understanding to a real-life scenario by looking at Disney’s take-over of
20th Century Fox, the competitor environment, supply chain analysis and stock market
analysis.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
•
I found the clarification of the Discounted Cash Flow method useful as I did not initially
understand it. We were introduced to estimations of annual earnings and the concept of
free cash flow.
It was useful to recognise that profit (measured from financial reporting methods) is not
always useful for valuations. Profit is not spendable whereas cash is. Cash flow is therefore
more suitable for valuations.
We learned more on the definitions and why the methods are used. Calculations to work out
NPV (Net Present Value) was also helpful.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
•
•
Who is involved and what processes are likely involved in a major M&A project?
Different aspects including market analysis, economies of scale, identification of potential
synergies, financial and non-financial factors (such as stakeholder management) to be
considered before a project is deemed viable.
How to estimate the cost of capital to use as a discount rate and estimation of annual
earnings.
We deciphered between asset-based methodologies and earnings-based methodologies.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
•
The equations and methods can be used to assess financial health and realistic future
potential of business ventures whilst providing a more systematic way looking at markets
and earnings potential. I will use the DCF method in the assignment.
It will give me a starting point to determining whether a merger will be positive or negative
in the future and how to apply a discounted rate to attain NPV.
16
Anthony Thompson
Name: Anthony Thompson Session: Week 4 Date: 11th Feb 2021
Experience: What happened? What did you discover (topics covered)?
•
•
•
•
We did a deep dive into the technicalities of the discounted cash flow.
Step-by-step process of Levyne’s spreadsheet model.
How to attain and add the external factors such as risk-free rate and market risk premium.
Excel best practice, common errors and how to avoid them.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
•
The spreadsheet can be quite daunting at first when looking at all the different elements.
Understanding why each part is there and how they work together is important.
Potential errors in excel and how to avoid them. Simple things such as pressing ‘Esc’ if you
have a cell selected or checking for rounding errors can be helpful.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
•
•
Where best to find information for risk free rate, market risk premium etc.
Clarity over finding the right corporate tax rate in the right year. (E.g. USA tax rate in 2020
and not European tax rate in 2021)
Distinction between EBITDA and Adjusted EBITDA.
Don’t panic if it doesn’t work first time round.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
•
•
I will be much better placed to apply the spreadsheet to different companies and scenarios.
I will be aware of potential pitfalls in Excel and will avoid them.
I will be sure to reference accurately the information I present in the spreadsheet.
17
Anthony Thompson
Name: Anthony Thompson Session: Week 5 Date: 25th Feb 2021
Experience: What happened? What did you discover (topics covered)?
•
•
•
•
Ken Lee gave a new perspective on what drives value. Common answer is cash flow, but
better answer is returns and growth.
Each industry has a different potential ROI, so you must use the industry average as a target.
E.g. biotech industry has extremely high ROI.
We discovered what companies are looking for from a successful deal besides just financial
gains. E.g. cash consideration, target smaller than acquirer so as to remove culture
arguments and issues of control. Why it usually makes sense to buy a company within your
current industry and not a new industry.
In the seminar we looked at GrubHubs main competitors, how performance is measured in
the sector (e.g. profitable growth, consolidation, large customer base). How GrubHub as
been growing its business and appealing to customers (e.g. repeatability, M&As, customer
convenience, platform tech etc.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
I found this lecture useful for understanding how a CEO thinks and analyses the market
context. This is important for the assignment. What are they looking for in the market, what
opportunities could there potentially be and how will a company know it has made a
successful acquisition besides just financial figures?
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
•
Week 4 was helpful in learning the technicalities of executing a DCM valuation whereas
Week 5 added to this by looking at the psychological and contextual factors that are applied.
E.g. rarely do listed companies buy other ones cheaply. What are the reasons behind an
acquisition? To improve target companies’ performance, get skills or technologies faster or
at lower cost, consolidation, or exploitation of industry specific scalability.
How do synergies benefit the company within a market? Share price reaction is often a good
indicator.
We learned the potential benefits of synergies from acquisition and what makes EPS
accretion occur.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
•
The experience has given me a much broader understanding of why an acquisition occurs
and what are the key considerations when planning to undertake an acquisition.
This will be helpful in the first part of the assignment when, from a CEOs perspective, I will
explain the competitor environment and undertake market analysis.
18
Anthony Thompson
Name: Anthony Thompson Session: Week 6 Date: 4th Mar 2021
Experience: What happened? What did you discover (topics covered)?
•
•
Project Risk Assessment. In the lecture, we discovered different types of risk e.g. takeovers
and metrics focusing on four key areas. 1. Takeovers & Mergers 2. NPD 3. Building/Facilities
4. Events
In the seminar, we discussed scenarios where risk played an important role such as the
design and construction of the channel tunnel. The general and specific risks involved were
numerous, including the cultural differences of a project that involved two different
countries, different engineering teams and different currencies.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
I enjoyed the discussion around executing an enormous engineering project from two
different countries. It was useful to consider how practical complexities of a project effect
the strategic viability of an investment decision.
I liked how much of this seminar tied into the learning from the Project Management
module in semester one. There were strong similarities so it was good to see how one
module can work in conjunction with another. The risk analysis, mitigation techniques
seemed familiar.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
I learned how different risks can be mitigated. I learned how budget control and cost
variance analysis can be used to prevent costs from spiralling out of control. I learned how
clear divisions of roles and responsibilities can increase chances of project success.
When undertaking Strategic Investment Decisions, potential risks need to be understood
before a project/acquisition is decided upon. The complexity of this can often be huge (as
with the Channel Tunnel and Heathrow Terminal 5) involving many different stakeholders.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
Identification and analysis of risks in important to decision making. I will incorporate this in
my assessment by looking into what could go wrong from JET’s acquisition of GrubHub. For
example, there may be culture clashes between the European and American companies
dampening the effects of the benefits of synergies.
19
Anthony Thompson
Name: Anthony Thompson Session: Week 8 Date: 18th Mar 2021
Experience: What happened? What did you discover (topics covered)?
•
•
•
The readings raised the question of how often value is generated from acquisitions. The
answer seems to have been that a lot of the time, it doesn’t. Often, they are wealthreducing events for the acquirer.
We had a look at some hits and tips on how to construct an assessment and how to get the
most out of reading academic journals.
The seminar also delved into decision making theory.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
•
I found useful the idea that what is not written in a journal article is almost as important as
what is inside it.
I enjoyed understanding what a paper contributes to practice.
The seminar also compared the critical reading of journal articles to assessing the
importance of different criteria in high stress decision making.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
I learned that avoiding mistakes is as important as seeing opportunities in strategic decision
making and acquisitions. The qualities that make a good assessment of an investment
decision has similarities to the qualities that make up a good analysis of a journal article.
This has taught me to approach journal articles from a critical standpoint. Megan stated that
“Just because an article is published doesn’t mean it’s any good”. As MBA students it is
important to decipher good quality articles and critically analyse them for what is there,
what is not there and what kind of contribution has resulted from the articles existence.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
Strategic Investment can be high risk, high stress and complex with many different factors
involved in successful decision making. The ability to see problems, shortfalls and missing
information is as important as realising potential profitability/synergies or other positive
potential outcomes of an investment decisions. This week has helped me to understand that
clear and holistic thinking of positive and negative features are essential to effective
strategic decision making.
20
Anthony Thompson
Name: Anthony Thompson Session: Week 9 Date: 25th Mar 2021
Experience: What happened? What did you discover (topics covered)?
•
Sustainability is an important part of any business as we have seen across the modules. The
identification of sustainability issues can drastically effect decision making. Poor efforts
towards sustainability and ethics can affect brand image and potential profitability.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
I found it useful to look at sustainability and ethics from a strategic point of view as we have
also covered it in other topics. The Financial Performance Management module explained
how the balanced scorecard and integrated reporting techniques are used to convey a more
holistic display of an organisations performance, incorporating more than just financial
information. The same principle applies here. An investment decision may be profitable in
the short term but other factors such as sustainability can have a huge impact on the
viability of a project. It was good to see another example of modules coming together and
showing similarities.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
We learned how to apply sustainability assessment to markets, industries, and organisations
and how the findings can be translated to stakeholders and used as measurements in
accounting.
We learned how real organisations such as Royal Dutch Shell are responding to sustainability
issues and making acquisitions accordingly. For example, purchasing the UKs largest network
of electric vehicle charging points. This is a response to concerns over carbon levels caused
by burning fossil fuels.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
•
•
•
It will encourage me to focus on looking at different aspects of the decision-making process
and look the environmental, ethical and sustainable aspects.
As the economy mirrors desires for a more sustainable and ethical world, this must be
reflected in business decision making. If all businesses consider this as a factor, then the
economy will start to mirror the desires of consumers, creating a ‘safe and just space for
humanity’.
I will apply this to the assignment by looking for environmental factors that would have
affected the bid price or the decision to acquire GrubHub.
ESG metrics will be assessed and added to the executive summary.
21
Anthony Thompson
Name: Anthony Thompson Session: Week 10 Date: 25th Mar 2021
Experience: What happened? What did you discover (topics covered)?
•
•
Week 10 avoiding project failures. We discovered what to look for from a successful
investment decision perspective. What does success mean for different project types? On
time, on budget and to the desired quality are key success factors.
We looked at various companies such as Formula 1 Singapore, Heathrow Terminal 5 and
Disney’s acquisition of 21st Century Fox and decided whether they were a success or not. The
discussion was interesting as many people had different opinions showing that the answer is
not a clear yes or no.
Reflection: What are your thoughts on your experience? What did you find
useful?
•
•
An important part of the decision-making process is determining what success will look like
and how to recognize it. Potential errors and mistakes that steer a project away from the
intended success must be identified.
Pinto & Kharbanda’s twelve points provide advice for staying on track with strategic
projects. If things go wrong, steps and measures can be taken to address the issues at play.
Generalisation: What did you learn? Capture your key learning points (takeaways)?
•
•
The importance of stakeholder communication and communication across the organization
during strategic investment projects.
Th lecture explained the importance of identifying stakeholders at the start of a project and
their expectations. Ongoing management of these expectations is also important.
Action: How will this affect your work? How will you apply your learning to the
assignment?
•
I will apply this to the assignment by looking at what failures may arise from JET’s acquisition
of GrubHub. Like sustainability issues, project failures will affect future value.
22