Corporate Finance

You work for a prestigious investment bank, Cowen Group (CG), which has been recently commissioned by Google Inc.
(now Alphabet Inc.) to investigate a number of potential M&A opportunities.1 The lead partner has asked you to prepare
a report with a detailed summary of your evaluations and recommendations in relation to a potential target firm.
PART A – TARGET SELECTION AND FIRM VALUATION (30%)
Google (now Alphabet Inc.) is seeking to grow through M&As. Your major task is to locate one potential target that
would interest Google and make a deal. Towards this end, you and your team are required to investigate all the listed
firms in the U.S. There is no limitation on the industry in which the potential target firm operates, as long as there are
decent synergies that can be created through this M&A and it fits the current and future strategic goal(s) of Google. It’s
a challenging task, so you and your team should do it step by step accordingly.
Step 1. Analyze Google Inc’s strategy, market position and industry overlook. Conduct a full SWOT analysis (Strengths,
weaknesses, opportunities and threats) of Google.
Hint: Useful information can be obtained from Google’s most recent 10K Annual Report, business news or other reliable
sources.
(5 marks)
Step 2. Decide whether Google should make a vertical or horizontal M&A and justify your choice.
(2 marks)
Step 3. Set the M&A search criteria and identify three listed firms that would potentially interest Google. All the selected
potential target firms must have at least five years of accounting information necessary for valuation. To check the
availability of accounting information, search for the firm’s 10K annual reports at the following link:
https://www.sec.gov/edgar/searchedgar/companysearch.html
Briefly discuss (and justify) the criteria that you have used to identify the three target firms.
Hint: Some examples of selection criteria are:
a. Is the firm in alignment with Google’s vision, long-term strategy and growth objectives?
b. What are the potential synergy gains? For example, it could be young firms with a pipe line of innovative projects
that may lead to promising products in the future; firms with strong expertise that allow Google to expand its
existing expertise in engineering and other functional areas; firms having a presence in a fast-growing industry
in which Google wants to enter in; or firms with strong names that can help Google to gain more market power,
etc. Here, do some brainstorming!
c. Does the firm have post-integration potential, i.e., how likely can Google successfully integrate the firm’s
business, technology, human capital and other resources to produce the synergy gains that Google intends to
achieve through the acquisition of the firm?