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Indian Institute of Management, Calcutta

Post Graduate Programme 2015-2016

Course Name Corporate Restructuring
Term PGP II, Term V
Name of Course Coordinator Prof. Ashok Banerjee
Name of the Instructor Prof. Ashok Banerjee

The objective of the course is to aware students about the various strategic ways to
achieve superior corporate performance. Many Indian companies have adopted
“maximising long-term shareholder value” as the central corporate objective. Enhancing
long-term shareholder value involves managing costs, driving margins, managing capital
structure, and inorganic growth through acquisitions and divestiture. The course would
start with cost management issues- making students aware that cost consciousness is vital
to sustain profitability. Then it would discuss several value creating strategies- creating
shareholder value to unlocking shareholder value. Finally, we would study the linkage
between employee performance and corporate objective- how employees can be
motivated to act as owners.
Session Plan:
Session Learning Description
1 1 Shareholder Vs. Stakeholder Theory
Agency theory and problem of free cash flows
Excess capacity problems
Essence of Corporate Restructuring
Strategic Control Map
Readings :
a) Agency costs of Free Cash Flows, Corporate Finance and takeovers
b) Value maximizations, Stakeholder Theory & the corporate Objective
c) Petroleum after the mega mergers
d) Bank of America round table on Corporate Finance
e) U.S. Corporate Governance: Accomplishments and Failings
2 4 Balance Sheet Restructuring:
Asset Restructuring
Modes of asset disposition
Readings :
Institutional Trading, information production, and the choice between spin offs, carve-outs, and

3 Corporate Debt restructuring

Sustainable Growth and sustainable debt
Leveraging assets to raise capital
Readings :
a) RBI guidelines on Corporate Debt restructuring
b) How Vishal Retail went off the shelf
c) Exercises on Securitization
4 Corporate Debt restructuring:
An exercise on Debt Restructuring
5 4 Balance Sheet Restructuring:
Share buy back and corporate performance
Indian experience
Who gains & who loses in share repurchase program
Stock splits –Information content
Readings :
a) Is a share buy back right for your company?
b) Evidence on how companies choose between dividends and open market stock repurch
c) Share repurchases as a potential tool to mislead investors
d) Note: Net Cash, Share Repurchase and EPS Growth (HBS 212101-PDF-ENG)
Case : Autozone, Inc (UV-6463-PDF-ENG)

6 Basics of business valuation

Readings :
a) Business valuation : a primer
b) An introduction to cash flow valuation methods ( HBS 9- 295-155)
c) Principles of Valuation
d) The valuation of closely-held companies in Latin America

7 Basics of business valuation

Case: Valuation of Airthread Connections (4263-PDF-ENG)
8 4 Valuing synergy in M&A deals
a) Can you run harder? Synergy
b) Do you feel lucky? The acquisition Premium
9 4 Determination of swap ratio of M&A deals
Factors behind structuring of purchase considerations
Monmouth, Inc. (4226)
10 Takeover Valuation: Justifying Premium
Method of payment and firm performance
Case: Gulf Oil Corp.- Takeover ( HBS 9-285-053)
11-12 2 Financing M&A
Deal Structuring in M&A
Risk Management in M&A
Readings :
a) Stock or cash?
b) Technical Note on structuring and valuing incentive payments in M&A: Earnouts and o
c) What determines the financing decision in corporate takeovers: Cost of capital, agency
Case: The MCI Takeover Battle: Verizon Vs. Qwest (HBS 9-206-045)
13 1 Risk Arbitrage in M&A
Readings :
a) A note on risk arbitrage (HBS 9-203-001)
b) Price Pressure around Mergers
14 Regulatory Issues in M&A:
How important is accounting issues in M&A?
a) Accounting for mergers and acquisitions ( HBS 9-101-021)
b) Sweeping Changes in world wide M&A Accounting
15 Regulatory Issues in M&A:
Taxation issues
SEBI Takeover code- implications
Takeover defense
Readings :
a) Takeover defenses
b) SEBI regulations on Takeover
16 2 Corporate takeover battle: Indian experience
Readings :
a) Sell –offs and Diversification
b) Note on Sum-of-the-parts valuation (HBS 9-209-105)
c) Restructuring through spinoffs
Case: L&T
17 Economic value Added (EVA) and shareholder wealth
EVA measurement
Drivers of EVA
Relationship between EVA and Market value Added (MVA).
Readings :
a) Linkage between economic value added and market value : an analysis
b) EVA and divisional performance measurement : capturing synergies and other i
Case : The continuing Transformation of Asahi Glass : Implementing EVA ( HBS 9-20
18-20 Project Presentations

The course would be conducted through lectures, case discussions, and illustrations.
Reading materials would be provided in polycopy and hence there is no prescribed text.
However, students may refer to journals (e.g. Mckinsey Quarterly, Harvard Business
Review, Journal of Applied Corporate Finance, and Financial Management), CMIE’s
monthly bulletin (Mergers and Acquisitions) and reference texts (mentioned above).

Evaluation Method
Quiz 30%
Class Participation 10%
Project 20%
End-term 40%