TAKEOVERS AND MERGERS Course Booklet Semester 2b 2011/2012

MBA Option Course

Contents

Page Number

Course Details .................................................................................................... 3 Course Description and Objectives .................................................................... 3 Learning Outcomes ............................................................................................ 3 Planned Student Learning Experiences ............................................................. 4 Teaching Approach............................................................................................. 4 Assessment ........................................................................................................ 4 Feedback ............................................................................................................ 5 Guidelines for Formatting and Handing in Assessed Work: ............................... 5 Failure to Attempt or Complete Assessed Coursework or an Examination ........ 5 Exam Arrangements for Disabled Students........................................................ 6 Plagiarism Statement.......................................................................................... 6 Appeals............................................................................................................... 6 Consultation........................................................................................................ 6 Course Monitoring Surveys ................................................................................ 7 Required Text(s) ................................................................................................. 7 Course Website .................................................................................................. 7 Advised Preparatory Work.................................................................................. 7 Course Topics..................................................................................................... 7 Study Programme............................................................................................... 9 Lecture Outlines and Readings .......................................................................... 9 Exam Papers ...................................................................................................... 9 Appendix 1: Further Reading.............................................................................. 9

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Takeovers and Mergers

Course Details
Course Code: Title: College: School: Course Organiser: Contact Hours: Semester: Lectures: BUST11045 Takeovers and Mergers Humanities and Social Science The University of Edinburgh Business School Paul Andre 20 2b Monday 30th April Thursday 3rd May

This is a 10-credit course. As per the Scottish Credit Qualifications Framework (SCQF), this means that it should entail 100 hours of student effort. For example: Contact hours Preparatory reading Tutorial work Assignments 10 x 2 hour lectures 20

2.5 hours per lecture hour in 50 advance of lecture Not applicable Not applicable 30 Total 100 student effort hours

Course Description and Objectives

Objectives/Aims The course evolves around the following themes: Business combinations and related corporate governance issues. The course will give students a good appreciation of the theoretical, practical and institutional aspects of Takeovers & Mergers. The course will further examine valuation and performance measurement issues related to Takeovers & Mergers. The emphasis is on cases studies that illustrate real life mergers. The Bruner textbook (2004) offers background information and a structure. Finally, the course should give students the theoretical background to better understand and criticize the important economic activity that is mergers and acquisitions.

Learning Outcomes
Knowledge and Understanding:
After completing this course, students should be able to: have an appreciation of some of the main strands of theory and the latest trends in research on which takeovers and mergers depend; understand some of the key strategic and operational financial decisions the corporation has to make and the relevant issues that need to be considered in the context of takeovers and mergers; understand how firms make takeovers and mergers and how they structure and finance them; understand how takeovers and mergers are reflected in financial reports and how investors react to them; understand some of the key success factors of takeovers and mergers. Course members will be expected to apply what they are covering on the course to current events in the financial news.

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Takeovers and Mergers

Cognitive Skills: After completing this course, students should be able to: demonstrate how takeovers and mergers can contribute to firm strategic success and value enhancement; evaluate the relevance and practical application of established paradigms and theories; critically appraise the importance of good takeovers and mergers planning; take a holistic approach to solving decision problems and assessing potential outcomes using a financial framework; explain choices in financial assessment methods and their rationale for adoption in a particular decision issue. Subject Specific Skills: After completing this course, students should be able to: utilise information and data obtained from a variety of sources, including the library, the internet, databases and management information systems for evaluating a financial problem apply financial methodologies to strategic and operational level decision problems in the specific context of takeovers and mergers analyse material presented in a variety of ways and structure it into a coherent argument for evidence-based decision making critically analyse problems in business finance and defend the conclusions reached

Planned Student Learning Experiences

The course is structured around case studies and their discussion (details of which are given later in this booklet) supported by additional selected readings from the set texts. Additional reference material will be provided during the lectures. The course features a combination of taught material, practical exercises, case studies, self-study from the set texts and supplementary readings and classroom discussion. Students are encouraged to contribute their own experiences to the discussions. The approach taken is interactive and participative, involves group work and exploration of live business issues.

Teaching Approach
Learning will primarily be through case studies and class discussions complemented with lectures. Issues around Takeovers & Mergers are complex and can take time to absorb and students should expect to have to invest time prior to lectures (including having read and prepared the case before class) in order to fully understand and participate in class discussions.

Cases used are (subject to change): Schneider-Square D Merger (CICA Case) Upjohn-Pharmacia Merger (Harvard Business Case 9-197-034) JDS Uniphase Merger (Ivey School of Business Case 9B01B031) Nantucket Nectars (Harvard Business Case 9-898-171)

Assessment
Team daily case hand-ins: 80% Class participation: 20% Teams will change for every case. Daily submission directly to course organiser, Monday to Thursday.

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Takeovers and Mergers

Feedback
Assessment feedback will be provided on a feedback form in the appropriate format. Assessment marks and feedback will be made available by (course organiser to provide a date should be within one month of submission or before students sit their degree examination) Feedback Format comments written on the coursework documentation for you to consult feedback form incorporating some overall comments on your work

1.Coursework documentation 2. Coursework

Guidelines for Formatting and Handing in Assessed Work:

All completed assignments should be stapled and clearly labelled with the students examination number for individual assignments and each students matriculation numbers for group assignments. Names should NOT be written on the assignments themselves, so that they can be marked anonymously. Students are asked to attach an assignment submission sheet as a front cover. The students name should be written on this sheet along with the examination number if an individual assignment or each students matriculation number for a group assignment. A template for this can be found at www.business-school.ed.ac.uk/mybiz. When the assignments are received the assignment submission sheet will be removed before the assignments are sent to the relevant lecturer(s) for marking. Students must also submit each assignment electronically by TURNITIN which can be located on WebCT. For the group assignment, once the groups have been composed, a group member will be assigned as responsible for this. Please see instructions via the student portal. This is to enable checks to be carried out for plagiarism on a random basis, or if suspicions are raised. The University has a standardised penalty for late submission of coursework. The School will apply a uniform penalty of a reduction of 5 marks for each 24 hours beyond the coursework deadline (Saturday, Sunday and University Public Holiday not included) unless late submission has been requested in advance of the submission date and approved in writing by the course organiser. For example: - an essay with a mark of 65% which is less than 24 hours late will be given a final mark of 60% - an essay with a mark of 65% which is between 24-48 hours late will be given a final mark of 55% - an essay with a mark of 65% which is 48-72 hours late will be given a final mark of 50% and so on... The penalty will not be applied if good reasons can be given, such as documented illness. COURSEWORK DEADLINES ARE ABSOLUTE AND MUST BE STRICTLY ADHERED TO OTHERWISE THE STANDARDISED PENALTY WILL BE APPLIED WITHOUT EXCEPTION. Extensions to coursework deadlines will normally only be granted in cases of illness or other extenuating circumstances. An extension can only be granted by the course organiser; requests for an extension to the deadline must be agreed with the course organiser prior to the coursework deadline. If this proves impossible, students must attach a letter of explanation to the coursework, signed and dated. If you are given an extension, you must ensure that the Postgraduate Office (Room GF.15, 29 Buccleuch Place, Edinburgh, EH8 9JS) has written proof of this, e.g. in the form of an email from the course organiser.

Failure to Attempt or Complete Assessed Coursework or an Examination

Where a student fails to attempt or fails to complete assessed coursework or an examination, the course organiser will seek to establish from the student whether the failure is legitimate (i.e. supported by appropriate documentary evidence) or not. A failure to attempt assessed coursework or an examination without good reason will result in a zero mark being awarded for that element of assessment. In the case of a legitimate failure to attempt or complete assessed coursework, the course organiser may decide to offer an extended submission deadline (without marks deduction for

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Takeovers and Mergers

late submission). Where a student is able to produce evidence of legitimate reasons for failure to attempt or complete an examination, and where it has not been possible to offer an extended submission deadline for a legitimate failure to attempt or complete assessed coursework, the course organiser will refer the case to the Special Circumstances Committee.

Groupwork Issues
Where group work is involved, should there be any problems with the group dynamic, these should be raised by two concurring members of the team with the course organiser before the Reading Week.

Exam Arrangements for Disabled Students

If required, specific reasonable adjustments will be made to enable disabled students to sit examinations, including any written, practice or oral examination, continuously assessed coursework or dissertation which counts towards the final assessment. For more information about the support disabled students can receive and the approval process for making reasonable adjustments visit http://www.ed.ac.uk/schools-departments/student-disability-service. Arrangements for degree examinations must be approved in advance by the Registry (650 2214), and the Student Disability Service (650 6828) for dyslexic students, and reported to the examiners. Academic Registry requires notification of specific examination arrangements for dyslexic students well in advance of examination weeks and specific deadlines apply (see http://www.ed.ac.uk/schools-departments/registry/otherinfo/dyslexia). For all other disabled students Academic Registry must see and accept a medical certificate or similar documentation relating to the student or be satisfied that an acceptable certificate will be produced. Such students should discuss their requirements with their Programme Director and/or the Student Disability Service at the earliest opportunity.

Plagiarism Statement
Plagiarism and cheating are offences against the University discipline. The full text of the Universitys regulation on plagiarism and cheating can be found on the Universitys website: http://www.docs.sasg.ed.ac.uk/AcademicServices/Discipline/StudentGuidanceUGPGT.pdf

Appeals
The process for students appealing against the assessment of grades is described in the Code of Practice for Taught Postgraduate Programmes.

Consultation
Students are encouraged to raise any concerns of a subject specific nature with the relevant course organiser. All but the simplest issues take time to resolve, and so please raise the issues as soon as you are aware of them. In the event that your course organiser cannot assist you, please contact your Programme Director.

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Course Monitoring Surveys

As the PGT programmes are constantly being streamlined to remain progressive and contemporary, it is essential that you provide feedback on the courses you undertake so that the academic and administrative staff can be aware of your needs and the needs of your peers; the only way we can do this is if you let us know our strengths and what can be improved to make your learning experience with us as relevant and fulfilling as possible. At the conclusion of every semester you will be asked to complete anonymous online course monitoring surveys. You will be notified when the surveys relevant to your programme become live. The results of these surveys will then be collated and distributed to the course lecturer(s) who will in turn provide feedback on the course. All information provided by students and course lecturer(s) will be taken into consideration by decision makers within the Business School and may alter the way that future courses are administered. We are providing you with an outlet to voice your opinions and it is very important for the current state and the future of the Business School and its students that you do so.

Required Text(s)
Bruner, Robert, Applied mergers & acquisitions, Wiley finance, 2004

Course Website
Lecture materials will be made available online via WebCT, which is accessible from the quick links area on MyBiz http://www.business-school.ed.ac.uk/mybiz/home On the course website you will be able to find a copy of this booklet, course handouts, announcements and other facilities. It is important that you regularly check the WebCT system in order to keep up to date with the course. You should be automatically registered for all your courses; if you are not please consult the Programme Secretary (email office+mba@business-school.ed.ac.uk) to ensure that your records are in order. A user guide and full details of how to logon and use the system are available on the website. N.B. It is vitally important that you check your WebCT mailbox regularly OR set it up so that it forwards messages automatically to your regular e-mail account.

Advised Preparatory Work

Students should have some basic accounting and finance training including some knowledge of basic valuation models.

Course Topics
1. 1.1 1.2 2. 3. 3.1 3.2 3.3 4. 4.1 4.2 4.3 Institutional and Theoretical Framework The takeover process, motives for takeovers and merger waves Structuring the deal: Regulatory, Legal, Accounting and Tax issues Valuation Issues Mergers and Acquisitions - Empirical Findings Long term operational performance following Takeovers & Mergers Short term financial performance following Takeovers & Mergers: Event studies Long term financial performance following Takeovers & Mergers Corporate governance mechanisms and merger success Ownership and control issues Performance and other issues Incentives and compensation

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Paul Andr Ph.D., CA Professor of Accounting and Management Control Co-Chair ESSEC KPMG Financial Reporting Chair ESSEC Business School Paris Email: andre@essec.fr Paul Andr, Ph.D, CA, is Professor of Accounting and Management Control at ESSEC Business School Paris and has had previous positions at University of Edinburgh, HEC Montral, UQAM and University of Ottawa. Paul is also Co-Director of the ESSEC KPMG Financial Reporting Centre. Paul has published many papers on mergers and acquisitions, corporate governance, ownership structure, and financial statement analysis. He is associate editor at the Journal of Business Finance & Accounting and is/has been on the editorial boards of Contemporary Accounting Research, Accounting in Europe, Comptabilit Contrle Audit and Finance Contrle Stratgie, among others. Graduated from the University of Waterloo (Canada) in 1996 with a Ph.D. in financial accounting and finance, Paul has been active in numerous research projects and in the development of financial statement analysis and mergers and acquisitions seminars for MSc, MBA and CFA candidates and of tailored training seminars in finance and accounting for various organisations. Chartered Accountant (CA) since 1986, Paul worked for one of the big international accounting firms, Ernst & Young, in Ottawa and Melbourne (Australia). Dr. Andr has been a visiting professor at the Universit de ParisDauphine, Universit de Paris-Crteil, Concordia University and ISCAE. He is currently Honorary Visiting Professor at Cass Business School, London and President of the Association Acadmique Internationale de Gouvernance.He has participated in various executive training programs at Bombardier, Pratt-Whitney, KPMG, NHS, SWIP, Danone and SNCF, to name a few. M&A and other relevant publications: Yen, T. and P. Andr, 2010, The Effects of Ownership Structure on Operating Performance of Acquiring Firms in Emerging Markets, Journal of Business and Policy Research, Vol. 5, No. 2, p. 217236 Andr, P., 2009, Discussion of Firm Performance and Managerial Succession in Family Managed Firms, Journal of Business Finance & Accounting, 36(3) & (4), April/May 485-495 Khalil, S., M. Magnan and P. Andr, 2008, The adoption of deferred share unit plans for outside directors and shareholder wealth, Corporate Governance: An International Review, 16(3) May, 210224. Andr, P., M. Magnan and S. St-Onge, 2008 Analysis of a merger from a governance perspective: the case of Abitibi-Consolidated and Donohue, Canadian Journal of Administrative Sciences, 25(2), 153-169 Xu, B., M. Magnan and P. Andr, 2007, The stock market valuation of R&D information in biotech firms, Contemporary Accounting Review, 24(4), Winter, 1291-1318. Yen, T., P. Andre, 2007, Concentrated Ownership and Long Term Operating Performance of Acquiring Firms: The Case of English Origin Countries, Journal of Economics and Business, vol. 59(5) September-October, p. 380-405 Andr, P. S. Khalil, and M. Magnan., 2007, Termination fees in mergers and acquisitions: Protecting investors or managers?,Journal of Business Finance & Accounting, 34(3&4), April/May, p. 541-566 Ben-Amar, W. and P. Andre, 2006, Separation of Ownership from Control and Acquiring Firm Performance: The Case of Family Ownership in Canada, Journal of Business Finance and Accounting vol. 33 (3&4), April/May, p.517-543 Andr, P., M. Kooli and J.F. LHer, 2004, The long-run performance of mergers and acquisitions: Evidence from the Canadian stock market, Financial Management 33(4), winter, p. 27-43.

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Takeovers and Mergers

Study Programme
Monday 30 April Themes: Strategy and Valuation AM Introduction + Break-out groups prepare Schneider-Square D case PM Class Discussion complemented with lecture Suggested pre-readings (beyond the case itself) Bruner chapters 1, 5, 9 & 12 Tuesday 1st May Themes: Negotiating and deal structure AM Break-out groups prepare Nantucket case PM Class Discussion complemented with lecture Suggested pre-readings (beyond the case itself) Bruner chapters 18, 19, 20, 25 & 30 Wednesday 2nd May Theme: Accounting and Taxes for M&A Governance, Hostile takeovers and takeover attack and defense AM Break-out groups prepare JDS case and class discussion PM Lecture & discussion on above topics Suggested pre-readings (beyond the case itself) Bruner chapters 16 Thursday 3rd May Themes: M&A success AM Break-out groups prepare Upjohn-Pharmacia case and discussion PM Lecture and discussion on M&A success Suggested pre-readings (beyond the case itself) Bruner chapters 3, 11, 36 & 38

Lecture Outlines and Readings

As above

Exam Papers
Where applicable all available exam papers can be found on the University of Edinburgh website at: http://www.exampapers.lib.ed.ac.uk/

Appendix 1: Further Reading

Sudarsanam, Sudi, Creating value from mergers and acquisition: The challenges, FT Prentice Hall (Pearson Education), 2nd edition, 2010. Weston J. Fred, Mark L. Mitchell and J. Harold Mulherin, Takeovers, Restructurings and Corporate Governance, Pearson/Prentice Hall, 4th international edition, 2004 Gaughan, Patrick A., Mergers, Acquisitions, and corporate restructurings, 5th edition, John Wiley & Sons, 2011

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Takeovers and Mergers