M&A: Theory and Practice
Dr. Jong-Goo Yi
Fall Semester 2007
Class Time: 4:00 – 6:50 PM, Thursday
Class Room: 111
Office Hours: By appointment
Course overview
This course will examine M&A from boththeoretical and practical perspectives. There are many reasons why M&A is being pursued: to effect synergy gains or reduce agency costs and others. In addition, M&A is an effective way to permit a company to exit the relevant market other than through insolvency proceedings. This was considered critical in the restructuring of Korean companies and in obtaining foreign capital. We will examine the history, motives, procedures and structure of M&A transactions and will review actual cases, using cases from HarvardBusinessSchool. Regulations on hostile takeovers and the related defenses will be examined.
Although this course will emphasize moreon the practical aspect than the theoretical, because theoretical understanding of the relevant issues is important in fully appreciating actual cases, reading materials will be assigned to better equip the students with theoretical background on the relevant area. So long as the students follow the reading materials, in-depth knowledge of finance and economics, although helpful, will not be required.
Class Format
For each topic, a brief lecture will be followed by a case study, with students’ participation. Each student or group will be required to make an oral presentation on one case from the readings and also on the term paper to be submitted.
Assignment and Grading
All students are expected to read assigned materials and to contribute to and participate in discussions. 30% of the total grade will be allocated to a student's preparation for classes and contribution to and participation in discussions, 25% to the mid-term debate on a case and the remaining 45% will be allocated to the term paper, which should be submitted no later than the last day of this class. Although no mid-term or final exam will be given, each team will be required to participate in the debate on a particular case during the mid-term exam period, the winner and loser of which will be determined by other class members based, upon which the grade for the debate will be determined. Due to the large size of the class, a group term paper (rather than an individual term paper) will be required. Each group will consist of no less than 4 and no more than 5 students.
Basic References
Selected chapters of the following books will be used as main references.
Stanley Foster Reed & Alexander Reed Lajoux, The Art of M&A, A Merger, Acquisition, Buyout Guidebook, 2nd Edition, Irwin Professional Publishing, 1995. ("Art of M&A")
Dale A. Oesterle, Mergers and Acquisitions, 2nd Edition, Thomson/West (2001)(“Oesterle M&A”)
Ronald J. Gilson and Bernard S. Black, The Law and Finance of Corporate Acquisitions, 2nd Edition, Foundation Press, 1995. ("Gilson & Black")
Selected Harvard Business Review (“HBR”) and HarvardBusinessSchool Cases.
Additional materials (including academic articles and articles of general interest (such as those excerpted from the Economist or Newsweek) will be assigned for each class.
Topics and Readings
- Week 1: Introduction to M&A;
-R. Brealey& S. Myers, Chapter 14 (An Overview of Corporate Financing), Principles of Corporate Finance (4th ed. 1991)
- Week 2: Global Trend of M&A; Merger Waves
-Bernard Black, “The First International Merger Wave (and the Fifth and Last U.S. Wave)”, 54 University of Miami Law Review (May 2000).
-Ashoka Mody and Shoko Negishi, “Cross-Border Mergers and Acquisitions in East Asia: Trends and Implications”, Finance and Development, Vol. 38, No. 1 (March 2001).
-Joseph H. Flom, “Mergers & Acquisitions: The Decade in Review”, 54 University of Miami Law Review (July 2000)
-Marina Marynova and Luc Renneboog, “Takeover Waves: Triggers, Performance and Motives”, No. 2005-107, TilbergUniversity Discussion Paper, September 2005
- Weeks3-4: M&A Motives and Corporate Governance
- R. Brealey & S.Myers, Principles of Corporate Finance (4th ed. 1991) and others.
-Robert Romano, "A Guide to Takeovers: Theory, Evidence and Regulation", Vol. 9 The Yale Journal on Regulation, 119, 1992;
-Marina Marynova and Luc Renneboog, “Takeover Waves: Triggers, Performance and Motives”, No. 2005-107, TilbergUniversity Discussion Paper, September 2005
-Bengt Holmstrom and Steven N. Kaplan, “Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s” Journal of Economic Perspectives, Vol. 15, No. 2, Spring 2001.
-Gregor Andrade, Mark Mitchell and Erik Stafford, “New Evidence and Perspectives on Mergers”, Journal of Economic Perspective, Vol. 15, No. 2, Spring 2001.
- Week 5: Transaction Structure, Procedures and Negotiation
-Oersterle M&A, Chs. 1 & 2
- Private Equity Funds
-A Note on Private Equity in Developing Countries (HBS, 3/1997)
-The Role of Private Equity Firms in Merger and Acquisition Transactions (4/17/2006)
- Week 7: Mid-term Case Debate
-Materials to be given later
- Week 8: Outside Speaker
-David Han, Head of Investment Banking, Credit Suisse First Boston, Seoul, “Leveraged Financing in M&A” (to start from 5:00 pm)
- Week 9: M&A Experience in Japan and China and International Regulations
-Curtis J. Milhaupt, “In the Shadow of Delaware? The Rise of Hostile Takeovers in Japan”, Columbia Law Review, Vol. 105 (October 2005)
-Frank Aquila, Lisa DiNoto, “Selling the Corporate Bastion: CNOOC’s Failed Bid for Unocal Raises the Question—Shareholer Interest or National Interest?”, The M&A Lawyer, November/December, 2005
-Dr. Yun-Mo Chung, “Comparative Analysis of M&A Regulations of Major Countries (in Korean to be translated into English), Korea Securities Research Institute, 2006
-Brent Shearer, “Raising Barriers to Inbound Deals: Political Intervention is feared in future cross border M&A”, Mergers and Acquisitions Journal, May 1, 2006
- Week 10: Case Study
(A) Media/Communication Industry
(1) AOL Time Warner, Inc., The Convergence of the “Old” and “New Economies”? (HBS, 9/2002)
(2) Valuing the AOL Time Warner Merger (HBS, 2/2002)
(B)Telecommunication Industry
(1)The Divestiture of Cable & Wireless HKT Limited (HBS, 01/2002)
(2)Social Capital at Work in PCCW’s Acquisition of Cable & Wireless HKT (HBS, 7/2002)
(C) Cosmetic Industry
-Bumble and Bumble: Building a Successful Business in Beauty and Fashion (HBS, 2/24/2006)
- Week 11: Case Study
(A) Banking and Financial Industry I
- Chase Manhattan Corporation: The Making of America’s Largest Bank (HBS,4/1998)
(B) Banking and Financial Industry II
-Korea First Bank (A) and (B) (HBS, 3/2002)
(C) Pharmaceutical Industry
- The Upjohn Company: The Upjohn – Pharmacia Merger (HBS, 2/1997)
- Week 12: Case Study
(A)Private Equity Investment
-The Exxel Group: September 1995 (HBS, 11/1997)
-Kmart, Sears, and ESL: How a Hedge Fund Became One of the Worlds’ Largest Retailers (Kellog School of Management, 8/16/2005)
(B)Food Industry
(1)Philip Morris Companies and Kraft, Inc. (HBS, 10/1994)
(2)Kraft General Foods: The Merger (HBS, 5/1995)
9. Weeks 13-14: Presentation of Term Papers by Students
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