NYU Stern School of Business

Undergraduate College

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

Fall 2011

Instructor Details

Amihud, Yakov

yamihud@stern.nyu.edu

212-998-0720

MW 2:00 - 3:15

KMC 9-58


    N/A

 

Course Meetings

MW, 2:00pm to 3:15pm

Tisch T-UC15


Final Exam:

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

 

Course Description and Learning Goals

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

 

Course Pre-Requisites

Knowledge of corporate finance is highly recommended.

 

Course Outline

 

New York University

Stern School of Business

Preliminary course outline (it may be changed later)

C15.0050 Professor Yakov Amihud

Corporate Mergers & Acquisitions Fall 2011, 9/7 to 10/24

Time: Mon & Wed. 2-3:15

Room: TBA

Office: Kaufman MEC 9-58

Communication: e-mail: yamihud, tel: 998-0720.

Office hours: 4-5pm on days of lectures and by appointment.

Grader: TBA

Notes:

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.

Grading:

Homework - 40%, final exam - 60%. 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.

Reading material:

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. 2

Assignments:

Assigned readings; solving the case Cooper Industries (available in the bookstore) and two sets of problems\cases. The three written assignments are solved in groups of three, formed by the students. At least one member of the group should have taken a course in corporate finance.

There is a final exam (last class).

Course Outline:

Date: Topic and readings:

9/7-12 (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 9/14): Valuation of targets and determination of exchange ratios

9/14 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)

9/19-21Methods of payment in acquisitions: reasons and consequences; special financial instruments associated with acquisitions: collars, contingent value rights, more.

Homework (due 9/26): Valuation of two offers with contingent payment

9/26-28 Solving homework problem on valuation of two offers with contingent payments.

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.}

10/3 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}.

10/5 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, pp. 539-540. { Ch. 5, 6. pp. 91-96, 115-116, 531-532.}

10/10 No class.

10/12 Defensive measures (continued)

10/17-19 Solving Cooper Industries (case due on 10/17)

10/24 Final exam3

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 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. 4

School-wide Course Policies

Attendance

  1.  

Class attendance is mandatory and part of a student’s grade. Absences may be excused only in the case of documented serious illness, family emergency, religious observance, or civic obligation. If you will miss class for religious observance or civic obligation, you must inform you instructor no later than the first week of class. Recruiting activities are not acceptable reasons for class absence.

Students are expected to arrive to class on time and stay to the end of the class period. Chronically arriving late or leaving class early will have an impact on a student’s grade. Students may enter class late only if given permission by the instructor and can do so without disrupting the class. Note: Instructors are not obligated to admit late students or may choose to admit them only at specific times and instructors are not obligated to readmit students who leave class.

Participation

  1.  

Participation is an essential part of learning in this course. Students are expected to participate in all facets of classroom learning.

Reading/Homework

  1.  

Students are expected to come to class prepared having read text and assigned readings prior to class. Homework, case studies, and other assignments are expected to be completed and handed in on time.

Late Assignments and Make-up Policy

  1.  

At the discretion of the professor, late assignments will either not be accepted or will incur a grade penalty unless due to documented serious illness or family emergency. Professors will make exceptions for religious observance or civic obligation only when the assignment cannot reasonably be completed prior to the due date and the student makes arrangements for late submission with the professor in advance.

Classroom Norms

  1.  

If applicable, note your preference regarding food in class.

Laptops, cell phones, Smartphones and other electronic devices are a disturbance to both students and professors. All electronic devices must be turned off prior to the start of each class meeting.

Ethical Guidelines

Student Code of Conduct

All students are expected to follow the Stern Code of Conduct

(http://www.stern.nyu.edu/uc/codeofconduct)

A student’s responsibilities include, but are not limited to, the following:

  1.  

A duty to acknowledge the work and efforts of others when submitting work as one’s own. Ideas, data, direct quotations, paraphrasing, creative expression, or any other incorporation of the work of others must be clearly referenced.

A duty to exercise the utmost integrity when preparing for and completing examinations, including an obligation to report any observed violations.

Students with Disabilities

  1.  

Students whose class performance may be affected due to a disability should notify the professor immediately so that arrangements can be made in consultation with the Henry and Lucy Moses Center for Students with Disabilities http://www.nyu.edu/csd/ to accommodate their needs.

 

Required Course Materials

Reading material:

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. 2

 

Assessment Components

   N/A

 

Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.

 

Grading

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges  as a guide, the actual distribution for this course and your own grade will depend upon how well  you actually perform in this course.

 

Re-Grading

The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

 

Professional Responsibilities For This Course

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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