1. Course Overview

1.1 Description from Course Catalog

Mergers and Acquisitions

This course examines the process by which takeovers and other corporate control transactions take place. Of particular interest will be the defensive measures by management against hostile bids, buyout transactions, the relation of takeovers to capital structure changes, and the insider trading in takeover contests.  4 cr.

1.2 Introduction

Building on the foundation that you have in our prerequisite, we will start with the valuation process learning financial forecasting and model construction. From there we will enter into the strategy, management, integration, due diligence, and ethical situations that surround this process and industry.

1.3 Prerequisites

a) Courses:

AD 630: Accounting

AD 731: Finance

b) Student Competencies:

Independent Research (APA Paper Format)

Familiar with:

MS Word, MS Excel, MS Power Point

c) Other Materials

Case Study Analysis

3. Text & Materials

3.1 Required Texts

I will provide you with a copy of the textbook, Mergers & Acquisitions, a Guide Through the Process.

*However, there are other materials you will need to acquire:

Case Study Analysis

The case studies for this class were chosen to represent different aspects of financial strategy. Case study enables us to venture into many business situations, analyze the important issues, and after detailed review, make recommendations.

Harvard Cases & Notes

Available through the Bookstore

VacationSpot.com & Rent-A-Holiday 9-800-334

Disney and the Acquisition of Pixar

May also be obtained at: www.hbsp.harvard.edu

Case Studies

Available through the European Case Clearing House

http://www.thecasecentre.org/

American Airlines 113-031-1

National Medical Care 200-014-1

Willamette 102-016-1

Teradyne 201-052-1

MedImmune 102-009-01

Trans World Airlines 201-037-1

Warburton, Becker & Chambers

CVS & Aetna – I will provide you this case

Books

Sullivan, John D. Case Studies in Mergers & Acquisitions, Authorhouse,

ISBN-13: 978-1418438449

May also be obtained at: www.bookstore.authorhouse.com/

I will also provide you with copies of the Mergers & Acquisitions text.

Optional Text

Brigham & Ehdart, Financial Management – Available at the Bookstore

Other Suggested Reading:

The Wall Street Journal

Investor’s Business Daily

Fortune Magazine

Business Week

3.2 Other Required Materials

a) MS Word, MS Excel, and MS Power Point

b) Boston University Library Link

c) Blackboard

Suggested Calculator

Hewlett Packard HP 12-C

4. Course Learning Objectives

4.1 Course Goals and Objectives

The course will enable the student to understand why they are important, how all aspects of a transaction are completed. The course will focus on valuation, due diligence, integration, agency issues, cultural challenges, the impact of transnational deals, legal challenges from the United States, the European Union, and the Far East. Students will also learn quantitative and qualitative decision-making, as well as the impact transactions, both good and bad, have on a corporation.

The course will cover the fundamental theoretical concepts, as well as management issues. Case studies will reinforce the theoretical concepts.

a) Purpose & Importance

The purpose is to define and analyze the major issues in mergers and acquisition, including: where to see potential problems in financial forecasts and strategic rationale and to recognize situations that may the result of agency issues.

b) Objectives

Upon completion of the course, the student will be able to:

· Understand the flow of an acquisition from initial solicitation to deal close

· Build and construct a discounted cash flow model using public data

· Have the understanding to explain complex financial terminology in simple terms

· Analyze proposed current transactions

In pursuing these objectives, the course will:

1. Use in class materials, text and cases

2. Combine innovative theory and practice

3. Combine the strategic with the tactical

4.3 Course Expectations and Delivery Mode

The course will be conducted by means of a sequence of class lectures. There will be one lecture each week. In each week will cover one or more core concepts.

Homework will be in the form of Excel spreadsheets, case review, and case studies.

Each week students will be assigned an individual excel exercise or research topic, which will be the focus of an in-class discussion.

Every student will be expected to contribute every week.

There is a major Final Group Research Project that will be in APA format. Students will be required to demonstrate their understanding of the key features of the course, as well as the practical application of tools and techniques.

4.4 Schedule

Class Schedule

The class content and schedule are listed in the table below. This is subject to change during the semester. If a conflict does happen, I will send a group email notifying you of the change.

1. May 20

Introduction & Review

Why Mergers Fail to Deliver to Shareholders

2. May 27

The Acquisition Process

Program: The Wall Street Fix – Using deals to cover accounting

3. June 1

Merging Cultures

Prepare Case: Pixar

Program: Pixar

Ethics in Finance

*Make sure you bring a financial calculator to this class

4. June 3

Basic Valuation Techniques

DCF & Model Construction

Private Equity – Lambert & Sears

Prepare Case: VacationSpot.com & Rent-A-Holiday 9-800-334

5. June 8

Letter of Intent

Antitrust

Hart Scott Rodino – What constitutes a restriction of trade?

Assignment Due: One page summary of the company to be analyzed.

Prepare Case: CVS & Aetna

6. June 10

Negotiations

Payment methods

Prepare Case: National Medical Care

Earnouts

Cash

Securities

7. June 15

Purchase and Sale Agreements

Prepare Case: Willamette 102-016-1

Prepare Case: Teradyne

8. June 17

Insider Trading & Bankruptcy

Prepare Case: Warburton, Becker & Chambers

Prepare Case: Trans World Airlines

9. June 22

Prepare Case: MedImmune 102-009-01

Prepare Case: American Airlines

Equity Financing: Start Up.com

10. June 24

Case: TBA

11. June 29

Case: TBA

12. July 1

Papers Due

4.5 Assignments

a) Class Assignments

Homework

· The first three weeks of will be an excel spreadsheet homework assignment, which is due before the beginning of class the following week. They will be evaluated and returned by the following week.

Case Studies

You will need to prepare 2 (1 of which must be from the authorhouse book) case studies of your choosing. Each case study will be due at the beginning of the class in which that case study is being discussed. For a successful case write up, you will need the following:

1. Case papers should address the key issues that pertain to the financial strategy and then make clear recommendations with as much support as possible.

2. Papers should be no more than three double spaced pages (not including exhibits) and include a cover page with your name, the date, the course number, and the title of the assignment (case name).

3. Papers should be organized into specific sections. For example, Background, Key Issues, Risk, Recommendations, and Detailed Support for Any Recommendations.

4. Late Papers will not be accepted.

5. Your grade will depend on how well you identify the issues and argue your recommendation.

Midterm Exam

There is no Midterm Exam in this course

Final Project

Your written assignment is as follows:

1. Locate a publicly traded company in an industry that interests you. Find a publicly traded competitor which is suitable for a merger or acquisition with this firm.

2. Write a ten page double spaced paper (not including exhibits) on why the company should be acquired and what purchase price should be paid. In addition to a hard copy, a copy of your paper on disk is required. The disk label should include your topic and all members of your group. Your analysis should include the “real” reasons behind the merger and not the standard answers. Major topics should include: A brief background of the industry which the company operates, a background on the company and the management team, the acquisition purchase price (you may want to include a base purchase price and the maximum purchase price your firm would be willing to pay), what makes this merger a good fit, a brief strategy on how the company will operate after the merger, and how the deal would be financed.

3. You have an enormous amount of material to use for this project. Annual Reports and 10Ks can be obtained by contacting the company’s Investor Services Department.

4. Prepare your presentation as though it was before the Board of Directors of the company. The class will be asking specific questions about your analysis, so be prepared.

5. Group participation by each member is critical to the success of the group. Therefore, each group member will evaluate each of the other members. I will provide each member with an evaluation form.

Two of the major evaluation criteria for the paper are:

1) How well do you apply the financial concepts and analysis for your proposed acquisition.

2) The quality and originality of the recommendations (and how well they tie to your analysis) of the company.

3) The quality of your twenty minute presentation with two analytical questions from the class.

The paper must follow APA Format. The maximum length of the paper is 15 double spaced pages, excluding references and abstract. You may attach as many pages as appendixes of data, tables, etc. as you need. A financial model with a discounted cash flow valuation is required and should be included in the paper to support your analysis.

Final Exam

There is no final exam in this course

Class Participation

Meaningful class participation is an important element in case study analysis. Therefore, it is imperative that students contribute to each class discussion. Please be prepared each week. Your class participation grade will consist of two elements: Attendance and Quality Participation. If you miss more than three classes, you will automatically fail the course regardless of your grades during the semester.

4.6 Course Grading

You can expect to be challenged in this course, and excellent, research quality work will be rewarded with an ‘A’. Grades do not follow a prescribed curve.

This is a Boston University course; that means something. One thing it means is that we recognize and reward excellence. Excellence is uncommon, even rare. Your grade, then, will reflect the standards of excellence set by Boston University, in which only truly distinguished work will receive the highest grade.

Student participation is defined very clearly as contributing to the discussion each class.

Course grading will consist of evaluations of the homework, midterm, final and a project, weighted as follows:

Grading:

First Case Write Up 25%

Second Case Write Up 25%

Final Project 30%

Class Participation 20%

(please note the attendance policy in the class participation description section.)

While there is no fixed number of grades at any level it is important to note that high grades reflect an excellence in the understanding of class material and organization of thought. In addition, an important aspect of any class is the shared thoughts and insights of the class members. Grades will also reflect an individual’s contributions to the class.

5. Requirements, Policies and Standards

5.1 Attendance

Attendance at classes is mandatory. Attendance will be taken.

5.2. Student Participation

Student participation is required in all aspects of the course. Participation in discussions is defined very clearly as contributing each week to the assigned discussion topics.

5.3       Paper Requirements

You are to complete the research paper using the American Psychological Association (APA) writing style and guideline for references format. Proper attribution is required for all sources.

You can download the student style guide from the American Psychological Association web site or you can purchase the APA style guide from the book store. As most referencing information is available either on the APA web site or in the course documents–the purchase of the guide is not essential. The guide will inform you as how to reference your paper correctly.

Papers in this class are to be RESEARCH PAPERS. Remember that work that you use from other authors MUST be referenced. You should never cut and paste other’s work with the idea of paraphrasing later. This is an area where students have made academic mistakes in the past. Remember that even a paraphrased idea must be cited. Please use the above mentioned APA website for a reference. If, for whatever reason, you are confused, please contact me and I will be happy to help you.

Also note that the internet is a wonderful tool, but should not be your primary focus for research. Also note that Wikipedia should not be used or cited as a reference.

Use the library. You have access to academic journals. Academic research is far more valuable than random internet searches.

5.4. Lateness Policies

5.4.1 Timely Presentation of Materials Due

All assignments (papers, homework, etc.) have due dates. Late work will not be accepted.

5.4.2 Requests For Make-Up Examinations

Not applicable for this course

5.5 Satisfaction of Department Mission Goals