NYU Stern School of Business

Undergraduate College

FINC-UB.0050.001 (C15.0050): Mergers, Acquisitions, & Restructuring

Fall 2012

Instructor Details

Amihud, Yakov

yamihud@stern.nyu.edu

4-5pm on days of lectures and by appointment

Kaufman MEC 9-58

 

Course Meetings

TR, 2:00pm to 3:15pm

Tisch T-LC21


Final Exam: TBA

Schedule exceptions
    Class will not meet on: TBA
    Class will meet on: TBA

 

Course Description and Learning Goals

 

1) This is an intensive, demanding course. The workload is similar to that of a regular 1.5-credit course. Please take this into account when registering. One student commented: "I thoroughly enjoyed your course, though the warning included in the syllabus was spot on.... it was a tough course in a short period of time!"

2) Knowledge of corporate finance is highly recommended.

3) Class discussions of current M&A events may make the schedule change. Please follow the announcements in class.

4) Students are expected to abide by the Stern MBA Honor Code in all aspects of this course.

"Because intensive courses are short and compressed, missing class diminishes the educational experience more than during a regular semester. Therefore, students are informed that they should not register for an intensive course if they anticipate missing even one session."

Course Description:

The course presents the theories and empirical evidence on mergers, acquisitions, and restructuring, and analyzes the effects of various policy options on stock values of acquirer and target companies. Findings on the reaction of stock prices to information on control transactions will be used to analyze the effects of various policy options in such transactions. Topics include valuating acquisition targets, methods of payment in acquisitions, strategies of acquisition, the use of leverage in acquisitions and the effects of acquisitions on bond values, major legal issues, case laws and defensive measures against hostile acquisitions. The course combines lecture material, analysis of cases, quantitative and qualitative analysis, and discussions of relevant news of such transactions. There will be an emphasis on fundamental concepts of valuation and other areas of corporate finance related to M&As. Suitable elective for students majoring in finance as well as students in management with knowledge in finance.

Students are encouraged to follow the M&A activity that is reported in the press during the semester and bring up issues and events associated with material covered in class. Please coordinate with me in advance.

 

Course Outline

Date: Topic and readings:

9/4, 6 (a) Introduction: types of business acquisitions and combinations; reasons for M&A - right and wrong. Who benefits from M&As.

(b) Institutional framework: tax issues; regulatory issues (antitrust).

Readings: G – Chs. 1, [2], 3 (pp.74-86, 110-124), 4, 6 (pp. 243-261), 15. {1, [2], 3 (pp. 78-85, 100-113); 4, 6 (pp. 240-250), 15.}

(c) Case discussion: Staples-Office Depot, Guidant (time permitting)

Homework (due 9/11): Valuation of targets and determination of exchange ratios

9/11 Valuation of merger targets; errors in valuation and the "bootstrap" game.

Determining the exchange ratio.

Issues in pricing takeover targets. Issues in valuation.

The discounted cash flow method; method of comparables.

Readings: G – Ch. 14 (both)

Solving homework valuation problems (Valuation and determination of exchange ratios)

9/13 The effects of M&As on stockholders' wealth in target and bidding companies - theory and empirical evidence.

Readings: G – Ch. 4, pp. 260-266, 564-586. { Ch. 4, pp. 250-258, 555-566.}

9/18 Class canceled; will be rescheduled.

9/20 Leverage: The effects of M&As on bondholders' wealth.

Wealth transfer between stockholders and bondholders; bankruptcy effect; maturity effect; risk effects; priority effects.

Readings: G - pp. 327-330 { pp. 184, 325-328}.

9/25, 27 Methods of payment in acquisitions: reasons and consequences; special financial instruments associated with acquisitions: collars, contingent value rights, more.

Reading: G – pp. 15-16, 593 (very little).

Homework (due 10/2): Valuation of two offers with contingent payment

10/2,4 Solving homework problem on valuation of two offers with contingent payments.

Defensive measures against hostile takeovers: rationale and methods. Board’s responsibility. State and federal regulations and takeover laws. Major case laws. Empirical evidence.

Readings: G –Ch. 3, pp. 95-104, Ch. 5, [6] pp. 539-540. { Ch. 5, 6. pp. 91-96, 115-116, 531-532.}

10/9,11 Solving Cooper Industries (case due)

10/16 No class

10/18 Copper industries (end of case discussion).

10/23 Final exam

 

Required Course Materials

 Recommended textbook: Mergers, Acquisitions and Corporate Restructurings, 2011, by Patrick Gaughan. John Wiley.

There is an old 2007 edition. The readings by this edition are marked in {…}

Some chapters have "esp." meaning the pages that are especially important. […] means: just skim through.

Additional reading material will be distributed in class during the course, and posted on BB.

 

Assessment Components

 

Recommended textbook: Mergers, Acquisitions and Corporate Restructurings, 2011, by Patrick Gaughan. John Wiley.

 

Grading

 Homework - 35%, final exam - 65%. The final grade distribution is expected to be as follows: 25% A and A-, 15%-20% C (inc. +/-), D & F, and the balance B (+/-). Class participation may help in marginal cases. Homework assignments are done in groups of three.

 

Professional Responsibilities For This Course

Rules:

1) Final exam: Failing to participate in the final exam leads to failing the course. The exam is closed books, closed notes. You can bring only a calculator.

2) Class: Computers (including hand-held computers) cannot be used in class. Late coming is not welcome.

3) Homework and cases will be solved in class. Written solutions will not be distributed. You need to get the solution in class. If anything remains unclear, I’ll be happy to explain, in class or during my office hour.

4) Homework: Please do not ask me how to solve them, and please do not check with me whether your solution is "on track." It is for you to solve them on your own. As it is, the guidance that I provide for the case compromises its objective, which is to put you in a real-life business situation and tackle it on your own.

5) Some (not all) of the homework is on material that has not been fully covered in class. You will need to do some learning on your own in order to solve the cases, you will have to think and be creative.

6) Please note the workload in this course in terms of written assignments (some are cases) and readings. In the past, some students thought it was heavy and "exhaustive."

7) ASK QUESTIONS either in class or after class.

 

Attendance

 

Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Assignments

 

Classroom Norms

 

Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 

 

Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 

 

Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.

 

Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.

 

Recording of Classes

Your class may be recorded for educational purposes

 

Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

 

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