Course Title: fbe 460: mergers, acquisitions and restructuring



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LECTURE TOPIC

ASSIGNMENTS AND DUE DATES

Week 1


8/26

Introduction to M&A


Text, Chapter 1



8/28

Introduction to M&A - continued

Case 1.2. Proctor & Gamble’s Acquisition of Gillette (pg. 49)

Week 2


9/2


HOLIDAY




9/4

Regulatory Considerations

Text, Chapter 2

Week 3


9/9

Regulatory Considerations - continued


Case 2.6. The Legacy of GE’s Aborted Attempt to Merge with Honeywell (pg. 86)


9/11


Common Takeover Tactics

Text, Chapter 3

Week 4

9/16

Antitakeover Defenses and Corporate Governance


Case 3.1. Mittal Acquires Arcelor – a Battle of Global Titans in the European Corporate Takeover Market (pg. 126)



9/18


Acquisition Process – Developing Acquisition Plans

Text, Chapter 4
Case 4.4. BofA Acquires Countrywide Financial Corporation (pg. 165)

Week 5

9/23

Implementation: Search Through Closing


Text, Chapter 5


9/25


Implementation: Search Through Closing - continued

Case 5.2. Exxon Mobil Buys XTO Energy In A Bet On Natural Gas (pg. 198)

Week 6

9/30

Integration


Text, Chapter 6


Case 6.5. The Challenges of Integrating Steel Giants Arcelor and Mittal (pg. 228)
Case 6.6. Alcatel Merges with Lucent, Highlighting Cross Cultural Issues (pg. 230)

10/2

MIDTERM (1st hour)
Introduction to Valuation (2nd hour)

Week 7


10/7

DCF Valuation



Sections 2-5, inclusive, and section 8 of Pitchbook due; Text, Chapter 7

10/9


DCF Valuation – continued

Case 7.1. Hewlett-Packard Outbids Dell Computer to Acquire 3 PAR (Key data will be provided to facilitate your solution) (pg. 279)
Case 7.2. Creating a Global Luxury Hotel Chain (pg. 281)



LECTURE TOPIC

ASSIGNMENTS

Week 8


10/14

Market Multiples of Comparable Public Companies


Text, Chapter 8



10/16

Market Multiples of Comparable Past Transactions, Breakup Value

Case 8.1. Google Buys YouTube: Valuing A Firm In Absence Of Cash Flow (pg. 320)

Week 9


10/21

Applying Financial Modeling Techniques To Value Mergers and Acquisitions


Text, Chapter 9


Case 9.2. Mars Buys Wrigley In One Sweet Deal (pg. 360)

10/23

Analysis and Valuation of Privately Held Companies

Text, Chapter 10
Case 10.1 Panda Ethanol Goes Public In A Shell Corporation (Pg. 401)

Week 10


10/28

Introduction To Deal Structuring; Structuring the Deal: Payment and Legal Considerations


Text, Chapter 11



10/30


Structuring the Deal: Payment and Legal Considerations - continued

Case 11.3. Boston Scientific Overcomes Johnson & Johnson To Acquire Guidant – A Lesson in Bidding Strategy (pg. 444)

Week 11

11/4

Structuring the Deal: Tax Considerations



Sections 6 and 7 of Pitchbook due;

Text, Chapter 12



11/6


Structuring the Deal: Accounting Considerations

Case 12.2. Teva Pharmaceuticals Buys Barr Pharmaceuticals To Create A Global Powerhouse (pg. 477)

Week 12

11/11

Private Equity, Hedge Funds, and LBO Structures and Valuation


Text, Chapter 13


11/13


Private Equity, Hedge Funds, and LBO Structures and Valuation - continued

Case 13.1. TXU Goes Private In The Largest Private Equity Transaction In History - A Retrospective Look (pg. 529)

Week 13


11/18

M&A Alternatives – Joint Ventures, Strategic Alliances and Licensing



Text, Chapter 14




11/20

Restructuring, Divestitures, Spin-Offs, Carve-Outs, Split-Offs, and Tracking Stocks

Text, Chapter 15



LECTURE TOPIC

ASSIGNMENTS

Week 14


11/25

Restructuring, Divestitures, Spin-Offs, Carve-Outs, Split-Offs, and Tracking Stocks - continued


Case 15.5. Kraft Foods Undertakes Split-Off of Post Cereals In Merger-Related Transaction (pg. 610)


PITCH BOOKS DUE (Sections 1-12)
Case 15.6. Sara Lee Attempts To Create Value Through Restructuring (pg. 613)

11/27

Cross-Border Mergers and Acquisitions: Analysis and Valuation

Text, Chapter 17

Week 15


12/2

Cross-Border Mergers and Acquisitions: Analysis and Valuation - continued


Case 17.3. Wal-Mart’s International Strategy Illustrates the Challenges and the Potential of Global Expansion (pg. 690)



12/4

Review for Final








FINAL EXAM

December 11

4:30 to 6:30 P.M.






Pitch Book Requirements
Objectives: This assignment addresses a goal of the course, to develop your ability to conceive and design a proposed deal. It exercises the broad range of skills developed in this course.
Assignment:


  • Form a team of 4-8 to work on the Pitch Book.




  • Pick the acquiring firm. It must be publicly-traded.




  • Choose the target. It must be publicly-traded or a division of a publicly-traded firm. It is recommended that you pick a publicly-traded target firm with whom there might be some solid strategic rationale to combine. Think seriously about the motives and economics of combination, and try to offer a hypothetical marriage that makes business sense. Your strategic rationale for this deal should be summarized clearly in your presentation, and should reflect careful thinking. You are free to choose any firm, though if you have a choice, you should avoid unnecessarily complex combinations. To spark ideas, you might consult lists of excellent firms and under performers.




  • Prepare the Pitch Book as if you were the VP of Corporate Development and the addressee is your CEO. As of the date of your proposal, your idea has been held secret by your team, unknown to the target firm. Your aim should be to convince the CEO to go forward with the proposed transaction, committing time and capital to consummate the deal.




  • Each team should address the following sections:




  1. Executive Summary: include strategic rationale for deal, the expected purchase price, sources of synergy value, and payment terms.


  1. Description of target company;

  • Describe target firm and target firm’s industry/market in terms of size, growth rate, product offerings and other relevant characteristics

  • Discuss why target firm was chosen among other possible firms you considered

  1. Show historical financial performance of target company for past 3 years and include latest income statement and balance sheet

  2. Compare target company with peers in terms of product offerings, corporate strategy, and customers. Compare financial performance in terms of sales growth rate, margins, EPS growth, ROE and leverage

  3. Summarize target company ownership

  4. Valuation of target company:

  • Show valuation based on DCF analysis (stand-alone valuation plus synergies)

  • Show valuation based on market multiples of comparable firms

  • Show valuation based on market multiples of past transactions

  • Show “football field” of values

  • Develop a preliminary minimum and maximum purchase price range for the target firm

  1. Propose a recommended financing plan (cash, debt or stock) without endangering the acquiring firm’s credit worthiness or creating unacceptable EPS dilution

  2. Identify potential integration challenges and possible solutions. For those teams characterizing themselves as financial buyers, identify an appropriate exit strategy.

  3. Identify possible risks to the deal and if they can be managed, and if so, how.

  4. Includes a hypothetical term sheet: price range, form of payment, form of transaction, key representations and warranties, covenants, conditions

  5. Strategy for negotiation

  6. Appendices

  • List articles read and data sources

  • Include any detailed analyses used to support summary statements made in the “body” of the paper

  • Include detailed information on possible synergies, financial forecasts of target company performance, forecast of buyer company including target




  • Due Dates

There are 12 sections in the pitchbook (see above). The pitchbook is due in three installments:




  1. Sections 2-5, inclusive, and Section 8 on Oct 7. Weight: 5% of grade

  2. Sections 6 and 7 due on Nov 4. Weight: 5% of grade

  3. Completed pitchbook (Section 1-12, inclusive) due on Nov 25. Weight 10% of grade.

You must deliver a hard copy of each installment at the beginning of class on the date due. Any assignment turned in late will receive a grade reduction.





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