Introductory description

N/A.

Module web page

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

The module will cover the following topics:

• Value creation in takeovers.
• Abnormal returns.
• Merger waves (Main characteristics of individual waves and theoretical explanations for cyclical patterns).
• Private equity.
• Merger arbitrage.
• Takeover defences.

Learning outcomes

By the end of the module, students should be able to:

• Understand the functioning of private equity funds and their role in recent M&A activities, and assess the validity of recent accusations against private equity investors.
• Critically reflect on the acquisition process as a complex situation where both the buyer and the seller have to assess many issues (such as payment method, hostility, deal initiation, auction design).
• Recognize merger waves, identify the key characteristics of past merger waves and provide theoretical explanations for their occurrence.
• Identify the relevant issues in accounts of M&A activity in the financial press and relate these to theoretical explanations discussed in lectures.
• Assimilate the findings of key research papers in the area of M&A, and critically reflect on the contribution of these papers to our understanding of the M&A process.
• Evaluate and interpret market reaction to a particular M&A deal for the target, bidder and in combination.

Indicative reading list

No core text.
Boone and Mulhering, 2009, ‘Is There One Best Way to Sell a Company? Auctions Versus Negotiations and Controlled Sales,’ Journal of Applied Corporate Finance, 2009, 21 (3), 28:38.
Devos, Kadapakkam and Krishnamurthy, 2009, ‘How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies,’ Review of Financial Studies 22(3), 1179-1211. Faccio and Masulis, 2005, ‘The choice of payment method in European mergers and acquisitions,’ Journal of Finance 60 (3), 1345-88.
Harford, 2005, ‘What drives merger waves?’ Journal of Financial Economics 77, 529-560.
Hazelkorn, Zenner and Shivdasani, 2004, ‘Creating Value With Mergers and Acquisitions’ Journal of Applied Corporate Finance 16 (2-3), 81-90.
Jensen, 2005, ‘Agency Costs of Overvalued Equity,’ Financial Management 34(1), 5-19.
Savor and Lu, 2009, ‘Do stock mergers create value for acquirers?’ Journal of Finance 64(3), 1061-97.

Subject specific skills

Identify mechanics, nature and sources of merger arbitrage.
Extract key information and data from external sources such as the financial press, annual reports, M&A data bases.
Use spreadsheet modelling techniques to value target firms and to compute abnormal returns in M&A situations.

Transferable skills

Demonstrate effective problem solving and team working skills.