Xavier University - Fall 2011

FINC 645-01: Mergers & Acquisitions

Instructor: Tim Kruse
E-mail: kruset@xavier.edu
Office: 240 Smith Hall
Class Meets: M 6:00-8:30 pm, Smith 346

Office Hrs: M 1:00 - 2:30, 5:30 - 6, 8:30 - 9

W 11 to 2:30
Office Phone: 513-745-3075

Course Materials: Takeovers, Restructuring, and Corporate Governance, 4th edition - Weston,
Mitchell, and Mulherin. I will post additional materials including articles and Power Points on
Blackboard.
Mission of the Williams College of Business: We educate students of business, enabling them to
improve organizations and society, consistent with the Jesuit tradition.
Course objective: This course provides the student with an introduction to Mergers and
Acquisitions as a means of enterprise value creation. We will examine several methods of
valuation and apply them in cases and simulations. Furthermore, we will cover several important
aspects of mergers/acquisitions such as the legal framework, taxes, takeover defenses, and deal
structure. All of these factors affect the likelihood that deals will close and then become
successful. A portion of the class time will also be spent discussing ongoing deals. Ultimately, I
hope the course provide a foundation upon which the student can build with further education
and/or work experience.
Course materials: All course supplementary materials will be available on Blackboard. It is your
responsibility to check announcements on Blackboard regularly I will assume that everyone
has access to Blackboard and either checks their campus e-mail regularly or forwards the e-mail to
another account.
Xavier University policies regarding privacy rights, incomplete work and attendance, and
academic honesty will be strictly enforced. If an incident of academic dishonesty occurs, the
most severe disciplinary action will be taken. Case solutions will be put through Turn-it-in.
Please see the current University catalog.
Performance Evaluation:
First quiz
Comparable transactions analysis
Case discussion/write-up
Simulation
Final exam

50 points
50 points
75 points
75 points
100 points

Most likely I will use a standard grading scale: 90% and above A; 80-89% B; 65-79% C; below
65% F. However, I might use a curve if necessary.
+ or may be added to these letter grades depending on the distribution of course grades.
Typically the lowest 1 or 2 people in a specific range receive a - and the highest 1 or 2 receive

a +.
Tests: Tests most likely will be a mixture of short essay questions, True/False/MC questions, and
problems. Partial credit is given on tests and all work must be shown on the problems. Bring a
calculator but no cell phones (especially smart phones) can be in view during the tests.
Questions Regarding Grading: Any questions regarding grading of assignments or exams must
be addressed within one week of return of the graded assignment or exam to the student.
Make-Up Exams: All exams must be taken on the date specified in the course calendar unless
approval of a make-up exam is granted PRIOR to that date by the instructor. Without prior
approval, make-up opportunities are limited to documented emergencies. The instructor
discretion is used in determining whether a situation constitutes an emergency. The sooner you
contact me about any problems, the better your chances of working something out. It will be the
students responsibility to schedule a time for a makeup exam before the next class meets no
exceptions.
Extra credit: To ensure fairness, no individual extra credit work is available.
Projects
Comparable transactions valuation: Choose a current (or very recent) takeover target of
interest to you. Provide a quick overview of the target firm and its financials/industry (2
pages of text maximum) and then perform a comparable transaction analysis to determine
with the offered (or paid) price is/was adequate.
Case analysis/discussion: Valuation of AirThread Connections. The case will be made available
through a Harvard Publishing coursepack. The goal of the case will be to perform Discounted
Cash Flow analyses of AirThread, a fictionalized version of a real company operating in the
cellular industry. I will provide you with questions/guidelines as we cover valuation in a few
weeks.
Simulation: Finance Simulation: M&A in Wine Country also available through the
coursepack. In the simulation, your team will be assigned 1 of 3 roles (there are two
small/medium sized wineries and a large international beverage group in the simulation). As
one of the small wineries, your goal will be to merge with the other small winery or be
acquired by the big group at the highest possible price. As the beverage group, your goal will
be to acquire one of the small wineries at a reasonable price.
Group size: Please form groups of 3 to 4 people. The total number of groups must be a multiple
of three for the simulation to work.

Important Dates
September 5 Labor Day no class
September 19 (first hour of class) Quiz
October 3 Comparables analysis due
October 17 Case write-up due and in-class discussion
October 31 begin simulation
November 7 end simulation
November 14 Simulation write-up due
December 12 - Test
Topic List here is a list of topics I hope to cover, in approximate order. The last section is
probably extremely optimistic.
Introductory concerns
Mergers at Kraft Foods and the food industry
Definitions (Chapter 1)
Merger waves (Chapter 7)
Legal issues (Chapter 2)
Note: The quiz will cover these topics
Valuation (Chapters 9 & 10 will be the starting point for the DCF bit)
Premiums paid analysis
Comparables analysis
o Comparable companies
o Comparable Transactions analysis
Discounted Cash Flow (DCF) analysis
o WACC method
o APV method
Strategic Issues
Why do companies merge (Chapter 6)
Do mergers work - the historical evidence (Chapter 8)
Practical issues
Deal structuring (a portion of chapter 4)
Private Equity (Chapter 16)
Merger arbitrage (Chapter 21)
Takeover defenses and shareholder activism (Chapters 19 & 20)
Merger accounting
Strategic Process (chapter 5)
Restructuring (Chapter 11 & 12 maybe)
Bankruptcy and other financial restructuring (Chapter 13)