Introductory description

This is an elective module available for WBS and non-WBS students.

The principal module aims are:

1. To equip students with a solid understanding of the economic motivations for combining two companies and the key drivers of value creation in M&A, including how the method of payment, sales process, participation of private equity and hedge fund investors, and broad market conditions influence the outcome of a deal.
2. To provide students with an applied framework for evaluating M&A as an investment decision and understand common approaches for valuing potential targets.
3. To engage students with real-world application and business case studies.

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:

• History of M&A - merger waves
• Economic motives for M&A
• Deal structure and consideration
• M&A valuation
• Leveraged buyouts and private equity
• Abnormal returns and merger arbitrage
• Hostile takeovers and anti-takeover defences
• Hedge fund activism

Learning outcomes

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

• Understand the economic drivers of corporate M&A activities.
• Be able to assess the advantages and disadvantages of alternative M&A deal structures and M&A approaches.
• Understand the role of private equity and hedge funds in the takeover process.
• 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

Four required case studies. No core textbook. Three textbooks recommended as general references on M&A:

1. Mergers, Acquisitions, and Other Restructuring Activities, 10th Edition, Donald M. DePamphilis, Academic Press (2019).
2. Mergers, Acquisitions, and Corporate Restructurings, 7th Edition, Patrick A. Gaughan, John Wiley & Sons Inc. (2018).
3. Investment Banking: Valuation, LBOs, M&A, and IPOs, 3rd Edition, Joshua Rosenbaum and Joshua Pearl, John Wiley & Sons Inc. (2020).

Subject specific skills

Learn how to apply different valuation techniques and modelling tools.
Understand how to perform an event study.
Develop the skills to construct a merger arbitrage trading strategy.

Transferable skills

Demonstrate effective problem solving and team working skills.