Introductory description

This module is designed to introduce students to the basic issues in mergers and acquisitions from corporate finance point of view, including valuation. The module will be based on the main research papers in the field.

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
   7.Valuation in the context of M and As
   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:

• Demonstrate comprehensive understanding of value creation in M&As and its measurement, the bidding process, merger waves, and private equity
• Demonstrate systematic understanding of DCF valuation in the context of M&As
• Assimilate findings of key research papers, and critically reflect on their contribution to our understanding of the M&A process
• Analyze and critically evaluate real-world cases, and communicate the findings

Indicative reading list

Jenkinson, Tim, Hyeik Kim, and Michael S. Weisbach. "Buyouts: A primer." In Handbook of the Economics of Corporate Finance, vol. 1, no. 1, pp. 161-238. North-Holland, 2023.

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.

Research element

The module builds on academic literature in the field of M&As. Students work with academic papers and are encouraged to think about their dissertation topic.

International

We have practical examples from many countries. We discuss papers with cross-country data sets.

Subject specific skills

Demonstrate practical knowledge of a spreadsheet package and IT applications in M&A related analysis (event studies, valuation)
Prepare professional reports reviewing M&A deals

Transferable skills

Demonstrate analytical and problem solving skills
Demonstrate written communication skills