TheLeeKongChianSchoolofBusiness

MBAAcademicYear2015

MBAELECTIVE
Instructor Name
Title
Tel
Email
Office

FNCE653MERGERS&ACQUISITIONS
: Ser-Keng ANG
: Senior Lecturer of Finance
: 6828 0284
: skang@smu.edu.sg
: 4071

COURSE DESCRIPTION
The Mergers & Acquisitions (M&A) market is widely regarded as a market for corporate control,
where firms are acquired or merged for a variety of right or wrong reasons.
Some M&A
transactions are pursued for strategic reasons to improve the effectiveness and efficiency
(synergistic) of the underlying business. M&A transactions could also be undertaken by management
to pursue their own interests, such as managerial entrenchment, which would be value destroying to
the shareholders. In the latter case, the market could intervene by punishing the management via
the takeover market.
This course serves to familiarize participants with the nuances of the M&A market. Specifically, it
aims to explain the role that M&A play in corporate strategy development. In this respect, some of
the related questions will be explored: Why firms undertake these transactions? What is the genesis
of value in these transactions? How much value, if any, is created? Who gains from these
transactions? What is the track record of value creation for M&A deals? How does M&A market
relate to corporate restructuring?
An important focus is relating the theory to the practical aspect of a deal. Here, participants will be
exposed to valuation techniques and issues; structuring considerations; aspects of M&A execution
including negotiation strategies, due diligence, documentations, legal and regulatory issues. Postacquisition integration which is a crucial part of M&A transactions will also be discussed.
This course will be relevant for those planning to pursue a career in finance or general management
in a corporate setting as well as those planning to pursue a career in private equity or at a deal
intermediary, such as an investment bank. As such, there will be some discussions on how an
investment bank organizes its corporate finance department and how this product fits with other
parts of its capital raising business.

LEARNING OBJECTIVES
By the end of the course, participants will be able to;

Apply the theories of corporate finance to practice of capital raising, e.g. capital structure
considerations and maximization of shareholder values.
Explain the drivers of M&A waves
Identify situations where values can be destroyed.
Discuss how the market of corporate control works?

Analyze and evaluate the fit of companies in a merger.

Identify the nuances and practicalities as well as apply the techniques of valuation of companies.
Describe the key issues arising out of execution of M&A transactions.

ASSESSMENT METHODS
Assessment modes should include the following components:
Final quiz: 40%
Two short class quizzes: 15% (you will be given a weeks advanced notice)
Class participation: 15%
Group research/presentation: 30%
Total: 100%
Academic Integrity
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication,
facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or
tampering with the academic work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the students own
work. Penalties for violation of the policy range from zero marks for the component assessment to
expulsion, depending on the nature of the offence.
When in doubt, students should consult the course instructor. Details on the SMU Code of
Academic Integrity may be accessed at http://www.smuscd.org/resources.html

INSTRUCTIONAL METHODS AND EXPECTATIONS

Class participation: Participants will be graded on quality of participation in class and engagement in
the course. Hence, participants are strongly encouraged to read ahead of the session and to read
widely as the course encompasses a wide coverage area
Group Project: Group Project aims to provide participants with the opportunity to learn by doing
(internalization of concepts) in groups of up to five.
The deadline for submission for the ppt slides will be at 5pm on the same day of the
presentation. Please submit a ppt copy via Dropbox on eLearn. All the presentations will be
posted on eLearn so that each of you would have a copy of others work to expand your learning
opportunity.
This project will require you to get into groups of up to five group members to analyze & critique an
M&A deal that has occurred (in your choice of deal, look for learning points) Presentations will be
limited to 20 minutes (excluding 5 minutes of Q&A).
The criteria for

Depth of analysis (35%)

Ability to apply concepts to the situation (20%)
Clarity of presentation (30%) including the ability to stimulate interest during the
presentation
Quality of slides (15%)

Class participation: This aspect of the assessment is intended to encourage preparations and
learning from each other through participation. The emphasis will be on the quality of participation
rather than quantity. In order to benefit from each session as well as have your other classmates
benefit from your participation, you are expected to prepare for each class so that you can engage in
active discussion in class.
Two short class quizzes: This assessment method is intended to provide you with timely
feedback on the progress of your learning. Each short quiz is 30 minutes and will be held in the
beginning of the class. You will be given at least one weeks notice to prepare/study for the short
quiz.
Final quiz: The format will be MCQ and True/False. It will be open book and notes (without
laptop). This will be a 2.5-hour paper held on the last session.

RECOMMENDED TEXT AND READINGS

Title: Creating Value From Mergers & Acquisitions
Edition: Second
Author: Sudi Sudarsanam (SS)
Publisher: Prentice Hall
ISBN: 978-0-273-71539-9
A good guide on the coverage and focus of the course is the slides that I post on eLearn. The
textbook is meant as a resource only if you are unclear about certain concepts, as well as for
advanced read before class sessions.
There is also a long list of readings list and a number of case studies please do the readings and
preparations before coming to class so that the discussion will be fruitful. If you have to prioritize:
the priorities would be the slides and the cases (these are the minimum), followed by the text book
references and additional readings. In some cases there are many chapters of the text to read,
please seek guidance from the slides as to how much to read.

LESSON PLANS
Session

Topic / Assignments
Introductions and course administration
Introduction to the M&A market

Theories on M&A
Rationale and strategic value of M&A
Alternatives to M&A business alliances
Corporate Restructuring

Case study: Acquisition of Wirley by Mars (case

to be posted on eLearn)

Readings
Readings:
Journal article reading:
Harford (2005): What
drives merger waves
Bruner (2002): Does M&A
Pay?
Textbook references
(selective reading)
SS chapters 1 to 7, 9 & 10
(very selectively)

Market for Corporate Control; Deal Evaluation,

Negotiation, Structuring & Financing

2&3

Bid strategies & tactics

Deal design & structuring
Forms of payment & financing of M&A deals
M&A execution issues
Competitive bidding

Textbook references
(selective reading)
SS chapters 8, 16, 20 & 21

Case study: Nestles Acquisition of Rowntree

A&B (case: IMD case)
M&A Valuation

4&5

Fundamentals of valuation
Equity vs. Firm valuation
Relative valuation
Best practices for financial modeling

Class exercise on M&A valuation P&G acquires

Gillette (spreadsheet template to be uploaded
onto eLearn)
M&A Process, Implementation & Post
integration issues

Process of M&A
Implementation of strategic plan
What could go wrong
Areas to focus on

Mini-case ArcelorMittal Integration (to be

posted on eLearn)
Case discussion: DaimlerChrysler Merger (based
on journal articles posted on eLearn)
Private Equity / LBOs / MBOs and M&A

Textbook references
SS chapters 14
Additional readings:
Journal article reading:
Myers (1984): Capital
Structure Puzzle

Textbook references
(selective reading)
SS chapters 12, 13, 22 to 24
(selective readings for
process, implementation &
post acquisition integration)
SS chapter 11 (LBO)

Introduction to PEs
Structuring LBOs
Key ingredients for success in LBOs
Financing LBOs
Valuation issues
Exits

Group presentations
Submission of the soft copy of the slides via
eLearn on or before 5pm on the day of the
presentation
Final quiz

Maximum 20 minutes
(excluding 5 minutes of Q&A)