This is course is a main course for the “Finance” emphasis and a supplementary course for the “Strategy” emphasis. More generally, the course should be useful to any student interested in capital markets, investment banking/private equity, strategy consulting, corporate development, entrepreneurship, accounting and control, business journalism, general management, and advising senior management.
A 2-hour class each week of the course. Classes mix in-depth case discussions, mini-lectures, hands-on financial analysis, and guest speakers. The success of case discussions depends on student preparation and active participation in class. One class may be devoted to project presentations and/or a simulation exercise.
The objective of the course is to provide an understanding of the strategic motivations and the drivers of value creation/destruction in mergers and acquisitions (M&A), as well as to develop skills in the design, evaluation, and negotiation of these transactions. Familiarity with M&A is a foundation for effective work in a wide range of fields including investment banking, private equity, strategic consulting, corporate development, and advising senior management.
The course will focus on analyzing M&A deals primarily from the perspective of finance and strategy, integrating issues from economics, accounting, law, and organizational behavior where appropriate. Successful M&A advisors not only evaluate individual transactions, but also offer guidance on capital market conditions and industry developments. Accordingly, we will examine past and current trends in financial markets and in specific industries, the motivation and comparative advantage of different players in these settings, and factors that can influence them. The course will bring in the perspectives on M&A deals of various key players, such as shareholders and other stock market participants, regulators, management, creditors, and other stakeholders.
The class sequence roughly follows the timeline of a deal and related activities. We will start with the review of the current state of the M&A market and recent trends, followed by a discussion of the role of takeovers in shaping corporate governance and the boundaries of the firm. We will then move on to the analysis of value creation in M&A and apply standard and M&A-specific valuation tools to evaluate acquisition deals and the associated synergies. This is followed by a discussion of how M&A strategies interact with firms’ financing policies and how payment methods are chosen. We will also discuss various differences between financial (PE) buyers and strategic (trade) buyers. Moving on to deal structuring, we will discuss contractual features of merger agreements and legal aspects of M&A deals. We will then address the more specialized issues such as the role of various regulations and merger arbitrage. Finally, we will explore organizational restructuring (break-ups, spin-offs, split-offs, carve-outs). You will then have an opportunity to apply your newly acquired skills in a live takeover simulation exercise designed to be both a learning tool and one of the assessment points (see below).
Evaluation and Grade Breakdown
|Case Write-Ups (group)||Ongoing||20%|
|Deal Concept Assignment or a Simulation Exercise (group)||Final 2-3 Weeks||25%|
A coursepack of case studies, supplementary readings, and articles.
As background reading, the following textbook is also recommended: J. Rosenbaum and J. Pearl, Investment Banking: Valuation, Leveraged Buyouts and Mergers & Acquisitions, 2nd edition, Wiley, 2013.
Further useful resources will be suggested.