Marketing Fundamentals - BUAD 307 s8

/ Course Title: FBE 460 MERGERS, ACQUISITIONS AND RESTRUCTURING
Syllabus for Fall 2012
Professor: Lloyd Levitin
Office: Acc. 301E
Office Phone: 310-740-6524
E-mail:
Teaching Assistant: Alexander Berkenkamp (
Lecture Class
Mon/Wed / 4:00 – 5:50 PM Room: HOH 305
Office Hours
Mon / 2:45 – 3:45 PM
Tue / 2:15 – 3:15 PM
Wed / 2:45 – 3:45 PM

Course Description

Practical understanding of the major strategic, economic, financial, human resources, and governance issues of mergers, acquisitions, and restructuring. The course is suitable for any Marshall undergraduate who desires a basic knowledge of M&A transactions in order to do effective work in a wide range of fields, including corporate development, corporate finance, investment banking, and consulting. The course is most suitable for students considering careers in finance.

Learning Objectives

This course will help you to:

·  Understand the role that M&A plays in the contemporary global market, and its use as a strategic tool to provide growth, enhance competitive position, transform a company or industry, and create shareholder value.

·  Develop a framework that can be used for analyzing M&A transactions including understanding strategic rationale, valuation methodologies, deal structures, bidding strategies, risk assessments, and the need for a value proposition.

·  Know how M&A can be used successfully as well as its pitfalls, dangers and risks.

·  Foster an understanding of the M&A process from target selection to doing the deal (including due diligence, integration planning, negotiating the agreement, announcing the deal), to closing and integration.

·  Have an understanding of commonly used takeover tactics and defenses.

·  Choose a path for restructuring that will meet corporate goals and create shareholder value.

·  Understand the practical limitations of the various valuation approaches.

·  Manage the deal structuring process to minimize the risk that a merger or acquisition will not meet expectations.

·  Know when alliances or joint ventures are preferable alternatives to mergers and acquisitions.

·  Be able to form an opinion as to probable success about a proposed deal.

·  Develop a concept, design a deal, and present a proposal for a merger and acquisition transaction.

·  Understand how value is created (or destroyed) as result of corporate mergers, acquisitions, and restructuring transactions.

Prerequisite

BUAD 215 or BUAD 306

Required Materials

·  APPLIED MERGERS AND ACQUISITIONS(UNIVERSITY EDITION) by
R. Bruner (Wiley, 2004) ISBN: 0471395064

Course Notes: Copies of lecture slides and other class information are available through your Blackboard account.

Teaching Methods

This course is taught through a combination of readings, a group project, and lectures. Each session will involve class discussion based on the lectures or assigned readings. We begin each session with a discussion of current events. You are encouraged to visit dealbook.nytimes.com before each class to obtain a grasp of recent news.

About the Instructor

Lloyd Levitin is a Professor of Clinical Finance and Business Economics at Marshall. He was Executive Vice President and CFO of Pacific Enterprises from 1982-1995 (now Sempra Energy), and was actively involved in the firm’s diversification program which included numerous acquisitions. He testified as an expert on utility diversification to the Senate Finance Committee of the U.S. Congress and has been a consultant for JurEcon, Inc., a nationwide consulting and research firm for management and counsel. He has a MBA from Wharton and a JD from University of San Francisco. He practiced as a CPA after receiving his MBA, and as an attorney after receiving his JD.

Grading Policies:

Assignments

/ Points / % of Grade
TESTS Mid-Term / 25 / 25%
Final Exam / 30 / 30%
M&A PITCH BOOK (Group Project)
Pitch Book / 20 / 20%
Oral Presentation / 10 / 10%
Peer Evaluation / 10 / 10%
Class Participation / 5 / 5%
TOTAL / 100 / 100%

Final grades represent how you perform in the class relative to other students. Your grade will not be based on a mandated target, but on your performance. Three items are considered when assigning final grades:

  1. Your average weighted score as a percentage of the available points for all assignments (the points you receive divided by the number of points possible).
  2. The overall average percentage score within the class.
  3. Your ranking among all students in the class.

Midterm and Final Exam (Midterm 25% of your grade; Final 30% of your grade)

The midterm and final exam will be closed-book, closed-notes. The final exam is cumulative from the beginning of the course. Laptops or any hand-held device with email capabilities cannot be used. You should bring a calculator to perform calculations.

M&A Pitch Book (20% of your grade)

This group project demonstrates your progress towards one of the key learning objectives of the course: “Develop a concept, design a deal, and present a proposal for a merger and acquisition transaction.” By the end of the third week of the semester, students will divide themselves into “teams” of four-to-eight students each to play the role of a publicly-traded company seeking to make an acquisition. Each team selects a real publicly-traded company it wants to represent, identifies a potential target (also a real publicly-traded firm), and prepares a “Pitch Book,” the purpose of which is to obtain CEO approval to commence negotiations. Key learning objectives include (1) M&A strategy, (2) target company selection, (3) value creation in an M&A transaction, (4) deal structuring, and (5) risk assessment and (6) ability to prepare a term sheet. This project will count 20% of your grade, the ground rules and deliverables for this project are stated on pages 5 and 6 of this syllabus.

Oral Presentation on M&A Pitch Book (10% of Your Grade)

The team that prepares the Pitch Book (see above paragraph) will also prepare an oral presentation to the class that supports the written project. The ground rules and deliverables are stated on page 7 of this syllabus.

Peer Evaluation on M&A Pitch Book (10% of your grade)

Study groups provide a valuable learning experience – how to work effectively and efficiently in groups (a common practice in Corporate America), learning from others, and sharpening a student’s ability to communicate with others. However, human nature being what it is, some students are tempted to relax and let others carry their load. In order to provide an incentive for all students to make maximum contributions to the team project, students will be asked to grade each team member’s contributions on a 10-point scale.

This evaluation is to be submitted by email to the Instructor before the last day of classes. Any team member who does not email his (her) evaluation of team members will be deemed to have given a 10-point score to each member of the team.

Class Participation (5% of your grade).

Attendance and participation are essential for success in this course. Students are expected to actively participate in the class discussions. Class meetings will involve discussions of the assigned readings and current events. Preparation for each class is essential.

In evaluating your class participation, I will consider the quality and frequency of your participation, with a clear emphasis on quality. Students are required to display their name cards in each class. I will have no other way to determine who is present and participating.

Academic Integrity

USC seeks to maintain an optimal learning environment. General principles of academic honesty include the concept of respect for the intellectual property of others, the expectation that individual work will be submitted unless otherwise allowed by an instructor, and the obligations both to protect one’s own academic work from misuse by others as well as to avoid using another’s work as one’s own. All students are expected to understand and abide by these principles. SCampus, the Student Guidebook, (www.usc.edu/scampus or http://scampus.usc.edu) contains the University Student Conduct Code (see University Governance, Section 11.00), while the recommended sanctions are located in Appendix A.

Students will be referred to the Office of Student Judicial Affairs and Community Standards for further review, should there be any suspicion of academic dishonesty. The Review process can be found at: http://www.usc.edu/student-affairs/SJACS/ . Failure to adhere to the academic conduct standards set forth by these guidelines and our programs will not be tolerated by the USC Marshall community and can lead to dismissal.

Student Disability

Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to be as early in the semester as possible. DSP is located in STU 301 and is open 8:30 AM to 5:00 PM, Monday through Friday. The phone number for DSP is (213) 740-0776. For more information visit www.usc.edu/disability.

Technology Policy

Laptop and Internet usage is not permitted during academic or professional sessions unless otherwise stated by the professor. Use of other personal communication devices, such as cell phones, is considered unprofessional and is not permitted during academic or professional sessions. ANY e-devices (cell phones, PDAs, iPhones, Blackberries, other texting devices, laptops, iPods) must be completely turned off during class time. Videotaping faculty lectures is not permitted, due to copyright infringement regulations. Audiotaping may be permitted if approved by the professor. Use of any recorded material is reserved exclusively for USC students registered in this class.

Classes Cancelled

Classed are cancelled for September 17, September 26 and October 1. Make-up classes will be scheduled in the following week, which will be videotaped for those students unable to attend.

Add/Drop Process

If you are absent six or more times prior to September 14, (the last day to withdraw from a course with a grade of “W”), I may ask you to withdraw from the class by that date. These policies maintain professionalism and ensure a system that is fair to all students.

Retention of Graded Coursework

Final exams and all other graded work which affected the course grade will be retained for one year after the end of the course if the graded work has not been returned to the student (i.e., if I returned a graded paper to you, it is your responsibility to file it, not mine).

Emergency Preparedness/Course Continuity

In case of a declared emergency if travel to campus is not feasible, USC executive leadership will announce an electronic way for instructors to teach students in their residence halls or homes using a combination of Blackboard, teleconferencing, and other technologies.

Please activate your course in Blackboard with access to the course syllabus. Whether or not you use Blackboard regularly, these preparations will be crucial in an emergency. USC's Blackboard learning management system and support information is available at blackboard.usc.edu.


COURSE CALENDAR

TOPIC
/
Date
/ Daily Activities / Readings / Project Due Dates
The Basics
/
Week 1
8/27
8/29 / M&A Market; Basic Terms
M&A Motivations; Payoff / Text, Chapter 1
Text, Chapters 2 and 3
Strategy
/
Week 2
9/3
9/5
/ M&A Strategy
Alternatives to M&A / Text, Chapter 6
Text, Chapter 17
Acquisition Process
/
Week 3
9/10
9/12
/ Initiating the Deal, 1st Round Documents
Due Diligence / Text, Chapter 7
Text, Chapter 8
Week 4
9/17
9/19
/ Negotiating Acquisition Agreement
Integration / Text, Chapters 25, 29 and 30
Text, Chapter 36
Week 5
9/24 / Auctions; Communication / Text, Chapters 31 and 35
Deal Structuring
/
9/26
/ Introduction to Deal Structuring / Text, Chapter 18 / Email instructor (1)

Week 6

10/1

10/3

/ Legal Form
Tax Issues / Text, Chapter 19

Week 7

10/8

10/10 / Form of Payment
Accounting Issues / Text, Chapters 20 and 22
Text, Chapter 16

Week 8

10/15 / Social issues and Deal Structuring Summary / Text, Chapter 24
/ 10/17 / MIDTERM

Valuation

and Pricing

/

Week 9

10/22
10/24 / How Value is Created
Valuation Methodologies / Text, Chapter 9
Text, Chapter 11

Week 10

10/29

10/31

/ Valuation Methodologies (continued)
Pricing

Takeover Attack and Defenses

/

Week 11

11/5

11/7

/ Hostile Bids and Takeover Defenses
Hostile Bids and Takeover Defenses (continued) / Text, Chapter 32
Text, Chapter 33
Legal Aspects /

Week 12

11/12

11/14

/ Governance
Securities Law, Antitrust / Text, Chapter 26
Text, Chapters 27 and 28

(1)Email to specify your team’s selection of proposed buyer and target.

TOPIC

/

Date

/ Daily Activities / Readings / Project Due Dates

Special Topics

/

Week 13

11/19

11/21

/ Risk Management
Holiday / Text, Chapter 23

Week 14

11/26

11/28

/ LBOs, Levered Recaps
Pitch Book Presentations / Text, Chapters 13, 5 and 12 to page 583 / Pitch Book Due at 4:00 PM
/

Week 15

12/3

12/5

/ Pitch Book Presentations
Pitch Book Presentations
/

Week 16

12/12

/ FINAL EXAM(1) / 4:30-6:30 PM

(1)http://www.usc.edu/academics/classes/term_20123/finals.html

Pitch Book Requirements

Objectives: This assignment addresses a goal of the course, to develop your ability to conceive and design a proposed deal. It exercises the broad range of skills developed in this course. A sample pitch book has been posted to Blackboard.

Assignment:

·  Form a team of 4-8 to work on the Pitch Book.

·  Pick the acquiring firm. It must be publicly-traded.

·  Choose the target. It must be publicly-traded or a division of a publicly-traded firm. It is recommended that you pick a publicly-traded target firm with whom there might be some solid strategic rationale to combine. Think seriously about the motives and economics of combination, and try to offer a hypothetical marriage that makes business sense. Your strategic rationale for this deal should be summarized clearly in your presentation, and should reflect careful thinking. You are free to choose any firm, though if you have a choice, you should avoid unnecessarily complex combinations. To spark ideas, you might consult lists of excellent firms and under performers.

By 4:00 p.m., September 26, please send an email to me indicating the proposed buyer and target firm in your proposed deal, and a brief discussion about why you will be recommending this target. Discuss why your firm (the acquirer) needs to make an acquisition and why the proposed target is a good fit. The proposed acquisition must be a purely hypothetical transaction. If you send the email after 4:00 PM on September 26, you will receive a grade deduction.