Mergers and Acquisitions, Program 080200.68 “Management”, Master program in “Strategic Management and Corporate Governance”
The Government of the Russian Federation
The Federal State Autonomous Institution of Higher Education
“National Research UniversityHigher School of Economics"
Faculty of Management
CourseTitle:Mergers and Acquisitions
Program 080200.68 “Management”
Master program in “Strategic Management and Corporate Governance”
Author(s):Marie-Ann Betschinger, PhD
Approved by the meeting of the Department «___»______20
Head of the Department ______Filinov N.B.
Approved by the Academic Councilof the Faculty «___»______20
ScientificSecretary ______Balaeva O.N.
Moscow, 2013
This document may not be reproduced or redistributed by other Departments of the University without permission of the Authors.
Course Description:
“Mergers and Acquisitions” introduces the students to the topic of M&As and links strategic with financial considerations. Mergers & Acquisitions gives first insights into the academic literature in the field, but also covers practical aspects. The electiveis useful for those intending to work as strategy consultants focusing on such transactions, or those who plan to work in Corporate Strategy functions within firms. Students that are interested in Mergers and Acquisitions as a field of research are encouraged to attend.
Course prerequisites:
Students are expected to be familiar with principles of strategic management andbasics in finance & statistics.
Course objectives:
1)Obtain insights into M&A history and trends, economic and managerial motives.
2)Get insights into the empirical academic literature in the field of mergers and acquisitions.
3)Understand major challenges to merger success and learn how to overcome them.
4)Learnhow to assess potential M&A candidates.
5)Learn aboutacquisition valuation.
6)Understand key factors in M&A deal-making.
7)Learn how to generate integration plans and how to manage integration.
In terms of skills, be able to
8)do an event-study using MS-Excel
9)carry out company and synergy valuations using MS-Excel
10)evaluate information gathered from a variety of sources
11)discuss take-over trends
12)critically evaluate seller and bidder strategies
13)construct a well-balanced merger/take-over argument in a report format
The Methods of Teaching
Class attendance and preparation of the class material is obligatory. Lecture classes will consist of a lecture by the instructor including discussions of the class material. The tutorials apply these new concepts by analyzing M&A data & news, solving numerical problem sets, or through the discussion of cases or discussion-questions which have been assigned as homework.
The following methods and forms of study are used in the course:
- Lectures including class discussion on readings
- Tutorials: MS-Excel applications, problem-sets or casediscussions
- Three written summary essays: One summarizes the event study methodology, two of academic papers. One of the academic paper summaries has to be presented in class.
- Three case write-ups
- Final Exam
- Acquisition project appraisal
- Self study
The course has 44 contact hours consisting of both lectures and tutorials. The lectures are designed to help students to understand the main concepts of the course. The tutorialsprovide illustrations of the frameworks taught during the lectures. They are interactive andare aimed at enhancing problem solving skills. Students should be prepared to contribute to the discussions. Threecase write-upsin groups are obligatory.Moreover, each student should write a short summary of three papers (event study methodology and two academic papers) and briefly present the major findings of one of the academic papers in class.As the aim of this elective is to develop a thorough understanding of issues relating to mergers and acquisitions, the term group project applies the insights gained during the course on one case. The information on the term project is contained in a separate handout.
Grades determination:
The grade is based on class participation (5%), case write-up & discussion (18%), summary of the event study and two academic articles and presentation of one of the academic articles (27%), acquisition proposal (29%), and exam (21%).
Main topics:
Part I: Introduction
1)M&As: Introduction
- Course Introduction
- M&Asand their alternatives
- Introduction into the Acquisition Process
- History of M&Ain the World
Obligatory Literature:
•Weston FJ, Mitchell M L and MulherinH J. 2004.Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education:Chapter 1 «The Takeover Process» 131-140, hapter 7 «The Timing of Merger “Activity».
•Martynova M, Renneboog L. 2008: A century of corporate takeovers: What have we learned and where do we stand?, Journal of Banking and Finance 32 (10), 2008: 2148-2152.
Supplementary Literature:
•Gugler K., Mueller D. C., Yurtoglue B. 2006. The determinants ofmerger waves. Working Paper SPII 2006-01. Wissenschaftszentrum Berlin.
•Oxley, J. E. 1997. Appropriability hazards and governance in strategicalliances: A transaction cost approach, Journal of Law, Economics and Organization, 13 (2): 387-409.
2)M&A Performance I
- History of M&A in Russia
- Theories on M&A performance consequences
- How to measure M&A success
- Event Study Methodology
Obligatory Literature:
•Weston FJ, Mitchell M Land MulherinH J. 2004. Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education: Chapter 6, pp.162-165, Chapter 7, pp.210-216, WMM: Chapter 6 “Appendix: Measurement of Abnormal Returns” 182-201.
•Zollo M, Meier D. 2008. What is M&A Performance? Academy of Management Perspectives,August: 55-76.
Supplementary Literature:
•Bertrand O, BetschingerM. 2012. Performance of domestic and cross-border acquisitions: Empiricalevidence from Russian acquirers. Journal of Comparative Economics 40: 413–437.
•Radygin A. 2010. The Russian Mergers and Acquisitions Market: Stages, Features, and Prospects. Problems of Economic Transition. 52(10): 65-95.
•Jensen M C. 1986. Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers.American Economic Review 76(2): 323-329.
•WilliamsonO. 1991. Comparative Economic Transactions: The Analysis of Discrete Structural Alternatives.Administrative Science Quarterly36: 269-296.
3)M&A Performance II
- Empirical findings on M&A performance effects
- Event Studies in Excel
Obligatory Literature:
•Martynova M, Renneboog L. 2008: A century of corporate takeovers: What have we learned and where do we stand?, Journal of Banking and Finance 32 (10): 2148-2152.
•Haleblian J., Devers C.E., McNamara G., Carpenter M.A., Davison R.B. 2009. Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management. 35: 469-502.
Part II: M&A strategies: Acquirors’ and Targets’ perspective
4)M&A Strategy Formulation: Acquiror’s perspective
- Strategic Intent of the deal (horizontal, vertical, conglomerate)
- How to select a partner?
- Acquisition programs and serial acquirers
- Corporate Governance and M&A
Obligatory Literature:
•Weston FJ, Mitchell M L and MulherinH J. 2004. Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education:Chapter 1 «The Takeover Process» pp. 36-40.
•Sudarsanam S. 2009.Creating Value from Mergers and Acquisitions: The Challenges, Prentice Hall.: Chapter 12, pp.351-355, 366-375.
•Laamanen T, Keil T. 2008. Performance of Serial Acquirers: Toward an Acquisition Program Perspective. Strategic Management Journal. 29: 663-672.
Supplementary Literature:
•Fan J, Goyal V. 2006. On the patterns and walth effects of vertical mergers, The Journal of Business, 79 (2): 877-902.
•Palich L.E, CardinalL.B, and Miller C C. 2000. Curvilinearity in the diversification-performance linkage: An examination in over three decades of research, Strategic Management Journal.21: 155–174.
•Ismail A. 2008. Which acquirers gain more, single or multiple? Recent evidence from the USA market. Global Finance Journal. 19: 72–84.
•Byrd, J. H. 1992. Do outside directors monitor managers? Evidence from tender offer bids. Journal of Financial Economics 32: 195– 221.
•Ahn S, Jiraporn P, Kim Y. 2010. Multiple directorships and acquirer returns. Journal of Banking & Finance 34: 2011–2026.
•Sirower ML, Sahni S. 2006. Avoiding the Synergy Tap: Practical Guidance on M&A Decisions for CEOs and Boards.Applied Corporate Finance, 18 (3): 83-95.
5)M&A Strategy: Seller & Target perspective
- M&A Planning: Designing & Organizing the seller process
- M&A Defense
Obligatory Literature:
•Weston FJ, Mitchell M L and MulherinH J. 2004. Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education:Chapter 19.
Supplementary Literature:
•Comment R, SchwertW. 1995. Poison or placebo? Evidence on the deterrence and wealth effects of modern antitakeover measures. Journal of Financial Economics. 39 (1): 3-43.
Part III: Valuation
6)Principles of M&A Valuation
- Synergies and Benefits of Control.
- Comparables (Companies, Transactions)
- Discounted Cash Flow Methods
- Determinants of the Bid Premium
Obligatory Literature:
•Eccles R G, Lanes K L, WilsonT C. 1999. Are you paying too much for an acquisition? Harvard Business Review July-August. 136-146.
•Damodoran A. 2005. The Value of Synergy.Working Paper.
•Damodoran A. 2005. The Value of Control: Implications for Control Premia, Minority Discounts and Voting Share Differentials.Working Paper.
•Weston FJ, Mitchell M L and MulherinH J. 2004. Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education:Chapter 9.
Supplementary Literature:
•Antoniou A, Arbour P, Zhao H. 2008. How Much Is Too Much: Are Merger Premiums Too High? European Financial Management, 14 (2): 268–287.
•Hayward, M.L.A. and Hambrick, D.C. 1997. Explaining the premiums paid for large acquisitions: Evidence of CEO hubris. Administrative Science Quarterly, 42: 103–127.
•Bris A, Brisley N,Cabolis C. 2008. Adopting better corporate governance: Evidence from cross-border mergers. Journal of Corporate Finance, 14, 224–24.
•Rossi, S, Volpin P. 2004. Cross-Country Determinants of Mergers and Acquisitions.Journal of Financial Economics 74: 277–304.
7)Valuation– applied
- Application in Excel
- Valuation Case
Part IV: The deal
8)Deal Structuring
- Payment
- Financing
Obligatory Literature:
•Caselli S, Gatti S, Visconti M. 2006. Managing M&A Risk with Collars, Earn-outs, and CVRs.Journal of Applied Corporate Finance. 18 (4): 91-104.
•Martynova M, Renneboog L. 2009. What Determines the Financing Decision in Corporate Takeovers: Cost of Capital, Agency Problems, or the Means of Payment?, Journal of Corporate Finance 15: 290–315.
•Rappaport A, Sirower ML. 1999. Stock or Cash: The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions.Harvard Business Review, November-December: 147-158.
Supplementary Literature:
•Kohers N, Ang J. 2000. Earnouts in Mergers: Agreeing to Disagree and Agreeing to Stay. Journal of Business. 73 (3): 445-476.
9)Due Diligence & Takeover process
- Due diligence
- Takeover strategies
- Negotiation process
Obligatory Literature:
•Eckbo E B. 2009. Bidding strategies and takeover premiums: A review. Journal of Corporate Finance, 15: 149–178.
•Lovallo D, Viguerie P, Uhlaner R, Horn J. 2007. Deals without Delusion.Harvard Business Review, December: 92-99.
•Aiello R J, Watkins MD. 2000.The fine art of friendly acquisition.Harvard Business Review (Nov-Dec): 100-107.
•Sebenius, James K. (2001): Six Habits of Merely Effective Negotiators, Harvard Business Review, April.
Supplementary Literature:
•Puranam P, PowellBC, Singh H. 2006. Due diligence failure as a signal detection problem, Strategic Organization, 4(4): 319–348.
•Harding D, Rouse T. 2007. Human Due Diligence, Harvard Business Review, April: 124-131.
Part V: Integration
10)Integration issues
- Integration challenges
- Restructuring through divestitures
- Post-Acquisition Review
Obligatory Literature:
•Jemison D B.1996. Corporate Acquisitions: A Process Perspective, Academy of Management Review11 (1): 145-163.
•Zollo S. 2004. Deliberate Learning in Corporate Acquisitions: Post-Acquisition Strategies and Integration Capability in US Bank Mergers. Strategic Management Journal. 25: 1233-1256.
•Weston FJ, Mitchell M L and MulherinH J. 2004. Takeovers, Restructuring, and Corporate Governance, 4/e, Pearson Education:Chapter 11: Corporate Restructurings and Divestitures.
Supplementary Literature:
•Barkema H G, Schijven M. 2008. Toward unlocking the full potential of acquisitions: The role of organizational restructuring. Academy of Management Journal, 51(4). 696-722.
•Birkinshaw J, Bresman H,Hakanson L. 2000. Managing the post-acquisition integration process: How the human integration and task integration processes interact to foster value creation. Journal of Management Studies, 37: 395-425.
•Homburg B. 2006. Is speed of integration really a success factor of M&A? An Analysis of the role of internal and external relatedness. Strategic Management Journal. 27: 347-367.
•Lee D, Madhavan R. 2010. Divestiture and Firm Performance: A Meta-Analysis.Journal of Management, 36: 1345-1371.
•Capron L, Guillen M. 2009. National Corporate Governance Institutions and post-acquisition target reorganization. Strategic Management Journal. 30: 803–833.
•Puranam P, Singh H, Zollo M. 2003.A Bird in the Hand or Two in the Bush? Integration Trade-offs in Technology-grafting Acquisitions, European Management Journal 21 (2): 179–184.