Introductory description

This module will introduce the basic issues in mergers and acquisitions (M&As).

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:

1. Value creation in takeovers
2. Abnormal returns
3. Merger waves (main characteristics of the individual waves and theoretical explanations for cyclical patterns)
4. Private equity
5. Ownership structure (costs and benefits of concentrated versus dispersed ownership, empirical evidence) and law and finance (shareholder protection)
   6.Modelling the takeover process
   An underpinning thread throughout this module is the financial manager's responsibility to act legally, ethically and thus professionally, along with the potential consequences of the reverse on stakeholders.

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.
• Recognize merger waves, identify the key characteristics of past merger waves and provide theoretical explanations for their occurrence.
• 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.
• Use spreadsheet modelling techniques to value target firms and to compute abnormal returns in M&A situations.

Indicative reading list

Patrick A. Gaughan; Mergers, acquisitions, and corporate restructurings, Wiley, 2007.
Weston, Mitchel and Mulherin: Takeovers, Restructuring, and Corporate Governance (4th international edition, Pearson).
Martynova and Renneboog; A Century of Corporate Takeovers: What Have We Learned and Where Do We Stand?, Journal of Banking and Finance, 2008.
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.
Harford, 2005, ‘What drives merger waves?’ Journal of Financial Economics 77, 529-560.

Subject specific skills

Use spreadsheet modelling techniques to value target firms and to compute abnormal returns in M&A situations.

Transferable skills

Extract key information and data from external sources such as the financial press, annual reports, M&A data bases.