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Corporate Restructuring

Course Objectives

The objective of this course is to provide introduction to corporate takeovers and other forms of corporate restructuring. In this course we will discuss the role of mergers and acquisitions as a corporate governance device will be discussed. This course will focus on different types of takeovers: horizontal versus vertical takeovers, friendly versus hostile takeovers, takeovers by management (management buyouts or buyins) or financial institutions (IBOs), etc. The determinants of takeover waves and corporate divestitures will also be discussed. Considerable time will be spent on valuation (techniques) applied to M&As. The sources of value (wealth effects) for both target and bidder firm will be studied for domestic as well as cross-border acquisitions. In this respect, the characteristics of the takeover bid (means of payment, status of the bid, industry etc.) will be studied. The course further will discuss asset sales and divestures.

Topics

This is a tentative schedule given according to topics and corresponding textbooks' chapters. I will determine the pace of class based on the overall student feedback and participation.

I. Introduction
a. What are corporate restructuring and M&A

II. Valuation: (Valuation methods for corporate restructuring transactions or basics on Valuation)
a. Introduction
b. Estimating risk parameters
c. Estimating cost of debt and cost of capital
d. Measuring earnings and Determining cash flows
e. Estimating growth
f. Estimating terminal value
g. Valuation methods:
i. DCF
ii. Relative Valuation
iii. APV
h. Valuing private and non-traded companies

III. Mergers and Acquisitions
a. Overview of M&A activities
b. Rationale of M&A
c. Tender offers and Takeover defenses
d. Methods of payments
IV. Asset Sales and Divestures (spin-offs, equity carve-outs, split-offs and tracking stocks)

Project

For this project you can work in groups of 3 to 4 students. Groups have to propose a potential M&A not currently under active discussion. Groups must prepare and submit a pitch book and will be asked at the end of the semester to give brief presentations to the class. A pitch book is an M&A investment banker's proposal to a potential bidder or target to consider participating in the deal. Identify a company that would be a good acquisition target and explain why.

1. Identify potential purchasers. These can be strategic buyers or financial buyers.
2. Analyze the industry and competitive landscape.
3. Estimate the potential synergies of the most likely bidder.
4. Conduct a valuation of the target company. Do a comparable company analysis and comparable deal analysis. Also do a DCF or APV valuation based upon forecasted free cash flows. Show that the value to a prospective acquirer exceeds the expected acquisition price.
5. Identify any impediments to a takeover. That is, explain how well the target has set up its takeover defenses, what they are and the target's likelihood to fight the acquisition.
6. Develop an attractive deal structure and financing method.

The project paper should consist of a Power point presentation and supporting documents. Details regarding valuation should be left as supporting documents. The papers have to be submitted by email. The deadline for the submission is 7-th February 2017.

Literature

Reference Books:
1) D.M. DePamphilis (D), Mergers, Acquisitions, and Other Restructuring Activities, Fifth Edition, 2010, Academic Press.
2) Brealey, Myers and Allen (BMA), Principles of Corporate Finance, 11th Edition (Global Edition), 2014, MacGraw-Hill. (PART 10 for Corporate Restructuring and M&A)
3) Weston, Mitchell and Mulherin (WMM), Takeovers, Restructuring, and Corporate Governance, Fourth Edition (International Edition), Pearson (Prentice Hall), 2004. (The 5th edition has not been available until July 2014.)
4) Damodaran Aswath (AD), Investment Valuation, 3rd edition, 2012 OR 2nd edition, 2002, John Wiley &Sons (either one is fine)

Recommended readings:
Other suggested supplementary books include:
Damodaran Aswath, The dark side of Valuation, PHFT
Gaughan Patrick A., Mergers, Acquisitions and Corporate Restructurings, 3rd Edition, 2002, John Wiley & Sons, Inc.
Koller Tim, Goedhart Marc & Wessels David, Valuation - Measuring and Managing the value of companies, 4th edition, McKinsey & Company.

Financial Press:
The Wall Street Journal Europe
Financial Times
The Economist

Institut für Finanzwirtschaft
Fakultät für Wirtschaftswissenschaften
Universität Wien

Oskar-Morgenstern-Platz 1
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