THE UNIVERSITY OF NORTH CAROLINA AT GREENSBORO Joseph M. Bryan Schoo o! B"s#ness an$ Econo%#cs Mas&er o!

B"s#ness A$%#n#s&ra&#on 'ro(ra% MERGERS AND ACQUISITIONS MBA 683-11 Fa )**+ 'ro!essor John En( ar Bryan o!!#ce -22E e1%a# 67ohnen( ar8ao .co% ,--./)0)1-+*) ,Ho%e/ ,--./3241-5.4 ,ce / ,--./--212-5+ ,Bryan/

No&e6 I 9# rare y :e #n &he Bryan o!!#ce or "se UNCG e%a# . Bes& co%%"n#ca&#on 9#&h %e 9# :e &he ao e%a# a$$ress. Required Texts: Case 'ac;e& A<a# a: e #n &he Boo;s&ore= #nc "$#n( Ba :#rer %ono(ra%. ur!"se: MBA .+- #s $es#(ne$ &o pro<#$e s&"$en&s 9#&h an "n$ers&an$#n( o! &he #%p e%en&a&#on o! corpora&e s&ra&e(y <#a corpora&e %er(ers an$ ac>"#s#&#ons. Upon co%p e&#on o! &h#s co"rse= s&"$en&s sho" $ :e e>"#ppe$ &o6 5. I$en&#!y &he $#!!eren& 9ays :"s#nesses can :e ac>"#re$ an$ #n$#ca&e &he c#rc"%s&ances "n$er 9h#ch each %#(h& :e appropr#a&e. ). Assess a %er(er?ac>"#s#&#on #n &er%s o! #& %ee&#n( a !#r%@s s&ra&e(#c o:7ec&#<es. -. Va "e a %er(er?ac>"#s#&#on !ro% an econo%#c perspec&#<e. E<a "a&e a %er(er@s syner(#es an$ &aA conse>"ences= an$ ho9 &hese !ac&ors %#(h& #%pac& &he or(an#Ba&#ona s&r"c&"re o! :o&h &he &ar(e& an$ ac>"#r#n( !#r%. 2. Un$ers&an$ &he re(" a&ory an$ corpora&e (o<ernance cons&ra#n&s on %er(er &ransac&#ons= an$ ho9 Boar$s?%ana(ers %"s& cons#$er &hese e e%en&s #n #%p e%en&#n( MCA &ransac&1 &#ons. C"urse Require#e$ts: A s&"$en&@s !#na (ra$e 9# :e :ase$ on &9o case 9r#&e1"ps= c ass par&#c#pa&#on an$ a &er% paper. The re a&#<e 9e#(h& o! each co%ponen& #s as !o o9s6 Case Dr#&e1"p E5 Case Dr#&e1"p E) C ass 'ar&#c#pa&#on Ter% 'aper )3F )3F 5*F 2*F

Yo" are eApec&e$ &o rea$ an$ "n$ers&an$ a cases. Dr#&e1"ps %ay :e prepare$ on any &9o o! &he !o o9#n( casesG MRC ,A/= Cooper In$"s&r#es= Yea&s Va <e an$ Con&ro s= Bro9n1For%an H#s&# ers Corpora&#on= Chrys er?Ha#% er= Es;#%o '#e Corpora&#on= &he John Case Co%pany= an$ 'h# #p Morr#s Co%pany? Ira!&= Inc. Anhe"ser B"sch %ay no& :e "se$. To #ns"re &ha& yo" $ea 9#&h a ran(e o! #ss"es o<er &he co"rse o! &he se%es&er= a& eas& one case %"s& :e &"rne$ #n $"r#n( &he !#rs& !o"r 9ee;s o! &he se%es&er. Dr#&e1"ps sho" $ :e #n$#<#$"a e!!or&s an$ are &o :e &"rne$ #n on &he e<en#n( o! c ass $#sc"ss#on. Typ#ca y= a 9r#&e1"p sho" $ :e :e&9een 3 an$ 5* &ype$ pa(es= eAc "s#<e o! eAh#:#&s. Each case 9r#&e1"p sho" $ con&a#n ,a& a %#n#%"%/ so%e $#sc"ss#on o! ,5/ &he $e(ree &o 9h#ch &he propose$ &ar(e& ser<es &he ac>"#r#n( !#r%@s s&ra&e(#c o:7ec&#<es= an$ ,)/ any <a "a&#on #ss"es &ha& appear &o :e re e<an& #n &he se&&#n( o! &he %er(er?ac>"#s#&#on &er%s ,"s#n( a&&ache$ eAh#:#&s &o $e%ons&ra&e yo"r ca c" a&#ons/. See s"%%ary a& en$ o! sy a:"s. C ass par&#c#pa&#on #s an #%por&an& an$ 9# co"n& !or 5* percen& o! yo"r !#na (ra$e. Be%"$d t&e d'%-t"-d'% !'rti(i!'ti"$) %"u #'% *e 's+ed t" !rese$t "r',,% i$ (,'ss "$e "- %"ur ('se .rite-u!s /"$e stude$t se,e(ted r'$d"#,% -"r e'(& ('se01 Yo" %ay a so <o "n&eer &o %a;e a presen&a&#on a& &he en$ o! &he co"rse $#sc"ss#n( yo"r %er(er ana ys#s pro7ec& $escr#:e$ :e o9. F#na y= s&"$en&s 9# :e as;e$ &o co%p e&e a &er% paper on any %er(er #s&e$ #n &he pro7ec& $escr#p&#on a& &he en$ o! &he sy a:"s ,or any o&her &ransac&#on o! yo"r cho#ce= pro<#$e$ yo" c ear #& 9#&h &he #ns&r"c&or an$ a$e>"a&e !#nanc#a #n!or%a&#on #s a<a# a: e &o co%p e&e &he re>"#re%en&s/. The paper sho" $ :e no on(er &han )3 pa(es eAc "s#<e o! eAh#:#&s. The paper #s $"e on &hree $ays :e!ore &he as& c ass so &ha& #& #s a (oo$ #$ea &o :e(#n &he research as soon as poss#: e. Yo" %"s& #$en&#!y yo"r cho#ce o! &ransac&#on :y c ass on No<. 0. A -e. -i$', $"tes: F#rs&= :eyon$ &he cases ,an$ a #%#&e$ n"%:er o! han$o"&s/= &here #s no re>"#re$ &eA& !or &he c ass. Ins&ea$= 'ro!essor Ba :#rer has p"& &o(e&her a en(&hy paper $ea #n( 9#&h &he s&ra&e(#c an$ <a "a&#on aspec&s o! %er(ers an$ ac>"#s#&#ons. Th#s 9# :e #nc "$e$ #n &he c ass %a&er#a s. S&"$en&s 9ho 9#sh &o (e& a copy sooner= can s#%p y e1%a# 'ro!essor Ba :#rer an$ he 9# sen$ yo" an e ec&ron#c copy. I! yo" are "nco%!or&a: e 9#&ho"& a &eA&= he can s"((es& a !e9 J5-* co%prehens#<e &eA&s on &he s":7ec& &ha& yo" can :"y. Secon$= MBA .)* ,Co%pe&#&#<e Ana ys#s an$ S&ra&e(y For%" a&#on/ an$ MBA .)3 ,Crea&#n( Va "e Thro"(h F#nanc#a 'o #cy/ are prerequisites !or &h#s co"rse. Th#r$= s&"$en&s are eApec&e$ &o :e !a%# #ar 9#&h an$ &o a:#$e :y &he Un#<ers#&y@s Honor Co$e. Yo" sho" $ s":%#& a 9r#&&en 9or; 9#&h a s#(ne$ s&a&e%en& &o &ha& e!!ec&.

SESSION ASSIGNMENTS

Sessi"$ 1) O(t1 23 De@ "se &h#s c ass per#o$ &o acco%p #sh &9o &h#n(s6 !#rs&= 9e 9# $#sc"ss pa&hs &o corpora&e (ro9&h an$ &he cho#ces %ana(ers !ace. A!&er $#sc"ss#n( &he ro e o! ac>"#s#&#ons #n &h#s s&ra&e(#c &ho"(h& process= 9e 9# re<#e9 9ha& yo" ha<e hope!" y earne$ a:o"& <ar#o"s <a "a&#on %e&ho$o o(#es. De can "se &he Ha#% er Chrys er case !or :o&h p"rposes. N"te: It is i#!er'ti4e t&'t %"u re4ie. '$d &'4e ("##'$d "- t&e ("$(e!ts i$ Se(ti"$s 3 '$d 3 "- r"-1 B',*irer5s #"$"6r'# *e-"re ("#i$6 t" t&is (,'ss1 I- $"t) %"u .i,, *e !,'%i$6 7('t(& u!8 t&r"u6&"ut t&e ("urse1 The Chrys er?Ha#% er case ra#ses a hos& o! #ss"es 9h#ch oppos#n( %ana(e%en& &ea%s an$ a$<#sors ha$ &o a$$ress. De 9# "se &he case &o eAa%#ne s&ra&e(y !a# "res an$ &o re<#e9 <a "a&#on &echn#>"es. In prepar#n( &he case= cons#$er &he !o o9#n( >"es&#ons6 5. Dha& s#&"a&#on,s/ !ace each co%panyK Ho9 9o" $ yo" e<a "a&e &he s&ra&e(#c nee$s?op&#ons o! eachK Dhy 9o" $ a %er(er= <ers"s o&her op&#ons ,s"ch as an a #ance as propose$ :y N#ssan &o Genera Mo&ors/ so <e &hese nee$sK Dha& %e&ho$s 9o" $ yo" "se &o $e&er%#ne a ran(e o! <a "es !or each co%pany. Dha& are ;ey <a "e $r#<ersK Use yo"r es&#%a&es &o se& a propose$ share eAchan(e ra&#o. Dha& 9o" $ &h#s $o &o !"&"re repor&e$ earn#n(s per shareK Ho9 sho" $ &he %ar;e& <a "e a %er(e$ co%panyK

).

-. 'repare a spec#!#c reco%%en$a&#on !or &he s&r"c&"re o! a co%:#ne$ co%pany= a$$ress#n( &he s&r"c&"ra an$ Lc" &"ra M #ss"es se& !or&h #n &he case. EAp a#n yo"r reasons. 2. 3. E<a "a&e &he r#s;s &o s"ccess !or each co%pany #n a propose$ %er(er. Be a9are &ha& &h#s case #s o!&en "se$ as a ne(o&#a&#on s#%" a&#on= an$ &ha& &here are essons #n &h#s re(ar$ !or "s &o eAa%#ne #n c ass.

Sessi"$ 2) O(t1 31 Thro"(ho"& &he neA& &hree sess#ons= 9e 9# oo; #n&ense y a& <a "a&#on op&#ons an$ cr#&#ca $ec#s#ons an$ &echn#>"es ra#se$ #n &he cases. De 9# a so eAa%#ne corpora&e s&r"c&"res "se$ &o e!!ec& &ransac&#ons an$ &he ro e o! ;ey a(ree%en&s. De@ :e(#n &h#s sess#on 9#&h a oo; a& &he Bro9n1For%an H#s&# ers Corpora&#on ,BFH/ case. The $ec#s#on pro: e% !ac#n( &he CEO o! BFH #s 9he&her &o :"y So"&hern Co%!or& a& &he as;#n( pr#ce o! J42.. %# #on. Dh# e !#nanc#a cons#$era&#ons p ay a ro e #n &he $ec#s#on= &here are #ss"es o! s&ra&e(#c !#& an$ pro$"c& pos#&#on#n( 9h#ch sho" $ e%er(e as #ss"es !or c ass $#sc"ss#on. Dh# e prepar#n( &he case= p ease cons#$er &he !o o9#n( >"es&#ons6 5. I$en&#!y &he ;ey co%pe&#&#<e charac&er#s&#cs o! &he $#s&# #n( #n$"s&ry. Ho9 has BFH a&&e%p&e$ &o pos#&#on #&se ! 9#&h#n &h#s #n$"s&ryK Hoes #&s s&ra&e(y appear &o :e 9or;#n( 9e K

). Assess &he propose$ ac>"#s#&#on #n &er%s o! s&ra&e(#c !#&. -. Bro9n1For%an #s ass"%#n( &ha& a 52 percen& cos& o! cap#&a !or &h#s ac>"#s#&#on. Is &h#s a reasona: e n"%:erK There@s $a&a #n &he case &o &es& &h#s !#("re N $o so%e ca c" a&#onsO5 2. Ho9 %"ch #s So"&hern Co%!or& 9or&hK Dha& are &he ;ey ass"%p&#ons #n <a "#n( &h#s ac>"#s#&#onK In par&#c" ar= ho9 %"ch o! So"&hern Co%!or&@s 9or&h #s assoc#a&e$ 9#&h &he es&#%a&e o! &he !#r%@s &er%#na <a "eK Ho9 $oes pro$"c& pos#&#on#n( p ay #n&o a o! &h#sK 3. Dha& sho" $ BFH $oK PPPPPPPPPPPPPPPPPPPPPPPPPPPP
5. To ca c" a&e &he cos& o! cap#&a = yo" 9# ha<e &o ca c" a&e &he cos& o! e>"#&y cap#&a . The case 9r#&er has pro<#$e$ &9o es&#%a&es !or &he %ar;e& r#s; pre%#"%G one :ase$ on an ar#&h%e&#c a<era(e= &he o&her on &he (eo%e&r#c %ean. Use &he ar#&h%e&#c %ean.

For &he a&&er ha ! o! &h#s per#o$= 9e 9# eAa%#ne &he Es;#%o '#e Co%pany case. Es;#%o '#e #s a %ar;e&er o! :ran$e$ !roBen no<e &#es. The co%pany #s o9ne$ :y Reyno $s Me&a s= a %a;er o! a 9#$e ran(e o! a "%#n"% pro$"c&s. Reyno $s 9an&s se #&s s&a;e #n Es;#%o '#e so &ha& #& can !oc"s on #&s core a "%#n"% :"s#ness. The Es;#%o '#e case presen&s s&"$en&s 9#&h a corpora&e $ec#s#on &ha& $epen$s on a ,re a&#<e y/ s#%p e <a "a&#on o! a !#r%. The <a "a&#on can :e approache$ "s#n( a $#sco"n&e$ cash ! o9 ana ys#s or :y "s#n( a <ar#e&y o! co%para: e p": #c !#r%s &ra$#n( %" &#p es. The %ana(er#a #ss"es #n &he case !oc"s on &he a:# #&y o! Es;#%o '#e &o s"ccess!" y co%p e&e &he propose$ o!!er#n( a& a L!a#r pr#ce.M In &h#s respec&= &he <a "a&#on aspec&s o! &he case are %"ch #;e #n#&#a p": #c o!!er#n(s. As yo" prepare &he case= cons#$er &he !o o9#n( >"es&#ons6 5. Dha& #s yo"r es&#%a&e o! &he <a "e o! Es;#%o '#e Corpora&#on ,E'C/K ). Dhy 9o" $ Nes& e 9an& &o ac>"#re E'CK Are &here po&en&#a syner(#esK Is Es;#%o '#e 9or&h %ore &o Nes& e &han #& #s 9or&h as a s&an$1a one co%panyK -. As an a$<#sor &o Mr. Reyno $s= 9o" $ yo" reco%%en$ &he sa e &o Nes& e or &he propose$ #n#&#a p": #c o!!er#n(K Dha& non1econo%#c? <a "e !ac&ors sho" $ :e cons#$ere$K Sessi"$ 3) N"41 9 De 9# "se &he cases #n &h#s sess#on &o con&#n"e o"r eAa%#na&#on o! <a "a&#on %e&ho$o o(#es an$ o&her !ac&ors #%pac&#n( ac>"#s#&#on s"ccess. In &he !#rs& par& o! &he sess#on 9e 9# &a;e a oo; a& &he Yea&s Va <e an$ Con&ro = Inc. case. Yo"r &as; as s&"$en&s #s &o <a "e Yea&s Va <e !ro% &he perspec&#<e o! TEI In&erna&#ona as 9e
5

as se&&#n( &he &er%s o! &he ac>"#s#&#on "n$er &he ass"%p&#on &ha& TEI 9# pay !or Yea&s &hro"(h an eAchan(e o! s&oc;. As yo" prepare &he case= cons#$er &he !o o9#n( >"es&#ons6 5. Dha& #s &he s#&"a&#on !ace$ :y :o&h Yea&s Va "e an$ TEI In&erna&#ona K Dha& are &he#r re a&#<e co%pe&#&#<e s&ren(&hs an$ 9ea;nessesK Dhy sho" $ each o! &hese co%pan#es 9an& &o ne(o&#a&e a %er(erK ). Ho9 %"ch #s Yea&s Va "e 9or&h per shareK Dha& appear &o :e &he ;ey ass"%p&#ons #n es&a: #sh#n( &he <a "e o! Yea&sK The case o!!ers yo" $a&a &o per!or% %" &#p e <a "a&#on approaches. Use &he%O -. Dha& pr#ce an$ eAchan(e ra&#o 9o" $ yo" reco%%en$ !or &he co%:#na&#on o! Yea&s an$ TEIK 2. Are &here any pos&1co%:#na&#on %ana(e%en& #ss"es &ha& nee$ &o :e a$$resse$K

In &he secon$ ha ! o! &h#s sess#on= 9e 9# &a;e "p &he MRC ,A/ case 9#&h an eye &o9ar$s :roa$en#n( &he ran(e o! &oo s !or e<a "a&#n( an ac>"#s#&#on #n s&ra&e(#c an$ econo%#c &er%s. De 9# pay c oser a&&en&#on &o &he &aA an$ acco"n&#n( #ss"es ra#se$ :y :"s#ness co%:#na&#ons. The ana y&#ca aspec&s o! &he case are re a&#<e y s&ra#(h&!or9ar$G ho9e<er= &here are so%e <ery #n&eres&#n( s&ra&e(#c $#%ens#ons 9h#ch 9# re>"#re yo"r a&&en&#on. As yo" prepare &he case= cons#$er &he !o o9#n( >"es&#ons6 5. Dha& are &he ;ey e e%en&s o! MRC@s corpora&e s&ra&e(yK ). Do" $ MRC@s s&ra&e(#c #n&eres&s :e a$<ance$ :y &he ac>"#s#&#on o! ARIK I! so= ho9K -. Ass"%e MRC ac>"#res ARI !or J2* %# #on an$ #>"#$a&es &he !#r% #n 54.+. Dha& ra&e o! re&"rn 9o" $ #& rece#<e on #&s #n<es&%en&K S"!!#c#en& $a&a #s a<a# a: e #n &he case &eA& an$ eAh#:#&s &o ca c" a&e &he Lpro7ec&@sM IRR. Hon@& #(nore &he cash #n! o9s assoc#a&e$ 9#&h &he re$"c&#ons #n 9or;#n( cap#&a o<er &#%e as sa es $ec #ne. 2. Dha& are &he $o9ns#$e r#s;s o! &he ARI ac>"#s#&#onK To assess &h#s #ss"e= s"ppose MRC ac>"#res ARI !or J2* %# #on an$ #>"#$a&es &he !#r% #%%e$#a&e y. Es&#%a&e &he cash procee$s !ro% s"ch a %o<e. In arr#<#n( a& yo"r es&#%a&es= do not #(nore &he &aA :ene!#&s assoc#a&e$ 9#&h &he 9r#&e1o!! or sa e o! asse&s a& ess &han &he#r :oo; <a "e. 3. Dha& pro: e%s 9o" $ yo" eApec& &o enco"n&er #n %ana(#n( ARI #n &he !"&"reK .. The appen$#A &o &he case pro<#$es $e&a# s o! MRC@s cap#&a :"$(e&#n( prac&#ces. In (enera = 9ha& $o yo" &h#n; o! &he%K Ho &hey see% &o :e 9e s"#&e$ &o han$ e a Lpro7ec&M #;e &he ARI ac>"#s#&#onK 0. I! MRC ac>"#res MRI= #& 9o" $ &o$ay :e re>"#re$ &o acco"n& !or &he &ransac&#on "s#n( &he p"rchase acco"n&#n( %e&ho$K Dha& are &he #%p #ca&#ons !or &h#s &ransac&#onK Ho9 sho" $ acco"n&#n( &rea&%en& :e !ac&ore$ #n&o MCA ana ys#sK I! yo" are "n!a%# #ar 9#&h &he acco"n&#n( !or %er(ers= Sec&#on + #n &he Ba :#rer han$o"& pro<#$es &he :as#cs.

+. Sho" $ MRC (o ahea$ 9#&h &he ac>"#s#&#on o! ARI a& an as;#n( pr#ce o! J2* %# #onK Sessi"$ 3) N"41 13 I& #s &#%e &o pa"se an$ eAa%#ne &he s&r"c&"res an$ processes "se$ #n MCA &ransac&#ons. Re<#e9 &he s&r"c&"re op&#ons 9h#ch I 9# pos& !or yo". Yo" nee$ a e<e o! !a%# #ar#&y 9#&h &he conse>"ences o! "s#n( $#!!eren& s&r"c&"res. I 9# a so 9ea<e #n&o &he $#sc"ss#on an o<er<#e9 o! &he ro e o! $oc"%en&s #n &hese &ransac&#ons. In &he secon$ ha ! o! &h#s c ass= 9e@ !#rs& &a;e "p &he Cooper In$"s&r#es case. I& #s an eAa%p e o! an ac>"#s#&#on <#a &en$er o!!er 9hen &he &ar(e& #s no& eAac& y en&h"s#as&#c a:o"& :e#n( &a;en o<er. As yo" prepare &he case= cons#$er &he !o o9#n( >"es&#onsG 5. Is N#cho son an a&&rac&#<e ac>"#s#&#on can$#$a&e !or CooperK Dha& ro e= #! any= 9o" $ #& p ay #n Cooper@s o<era corpora&e s&ra&e(yK ). Dha& #s &he %aA#%"% pr#ce &ha& Cooper can a!!or$ &o pay !or N#cho son an$ s&# ;eep &he ac>"#s#&#on a&&rac&#<e !ro% &he s&an$po#n& o! CooperK N"te: There #s a (oo$ $#sc"ss#on #n &he case a:o"& &he syner(#es Cooper can #%par& &o N#cho son. Th#s #n!or%a&#on= co"p e$ 9#&h o&her case $a&a= sho" $ a o9 yo" &o <a "e N#cho son "s#n( &he DACC %e&ho$. Ass"%e a DACC o! 5* percen& !or N#cho son as par& o! Cooper. -. Dha& are &he concerns an$ 9ha& #s &he :ar(a#n#n( pos#&#on o! each o! N#cho son shareho $ersK Dha& %"s& Cooper o!!er each (ro"p #n or$er &o ac>"#re #&s sharesK N"te: To $ea 9#&h &h#s #ss"e= &ry &o &h#n; a:o"& 9ha& op&#ons each p ayer has a& &h#s po#n& #n &he $#sc"ss#on. 2. Ass"%e &ha& Cooper %ana(e%en& 9an&s &o ac>"#re a& eas& .* percen& o! &he o"&s&an$#n( N#cho son s&oc; an$ %a;e &he sa%e o!!er &o a s&oc;ho $ers= 9ha& o!!er %"s& Cooper %ana(e%en& %a;e 1 #n &er%s o! $o ars per share an$ o! !or% o! pay%en&K

Sessi"$ :) N"4128 The se&&#n( #n 'h# #p Morr#s@ ac>"#s#&#on o! Ira!&= Inc. pro<#$es ano&her oo; a& &he &a;eo<er %ar;e& an$ ho9 !#r%s &ry &o "se res&r"c&"r#n( as an an&#1&a;eo<er $e<#ce. Dh# e &he case #s L$a&a r#ch=M 9e@ a<o#$ &he n"%:er cr"nch#n( co%ponen& o! &he case assoc#a&e$ 9#&h &he res&r"c&"r#n( p an :e#n( propose$ :y Ira!&= an$ !oc"s on #ss"es o! s&ra&e(#c !#&= %ar;e& $yna%#cs an$ corpora&e (o<ernance. 'repare &he case 9#&h &he !o o9#n( >"es&#ons #n %#n$6 5. Dhy #s Ira!& a &a;eo<er &ar(e&K

). Sho" $ 'h# #p Morr#s ac>"#re Ira!&K Dha&= #! any= are &he po&en&#a syner(#es !ro% &he ac>"#s#&#onK Dho #s &he %a7or :ene!#c#ary o! &hese syner(#esK N"te: There@s $a&a #n &he case &ha& can a o9 yo" &o <a "e &he syner(#es #n $o ar &er%s. -. Dha& $o yo" %a;e o! Ira!&@s propose$ res&r"c&"r#n( p anK 2. Ho9 9o" $ yo" assess &he s&oc; pr#ce #n!or%a&#on #n case EAh#:#& 5-K Dha& #n&erp ay o! e<en&s #s con&r#:"&#n( &o &he chan(es #n share pr#ceK Dha&@s &he %ar;e& &ry#n( &o &e "sK 3. Sho" $ 'h# #p Morr#s #ncrease #&s :#$ !or Ira!&K I! yo"r ans9er #s yes= spec" a&e on 9ha& 9# happen &o &he pr#ce o! 'h# #p Morr#s@ co%%on s&oc;. I a so 9# #n&ro$"ce &he #ss"e o! an&#&r"s& :arr#ers &o %er(ers an$ ho9 &hese are e<a "a&e$ #n &he c"rren& en<#ron%en&. To conc "$e o"r sess#on= I 9# $#sc"ss &he hos&# e &a;eo<er o! B"r #n(&on In$"s&r#es #n 54+0 an$ &he #ss"es &ha& &he %ana(e%en& &ea% an$ Boar$ !ace$. I 9# a so $#sc"ss &he s&a&e o! $e!ens#<e &ac&#cs #n &o$ay@s MCA en<#ron%en&.

Sessi"$ 6) De(1 :1 For &he !#rs& par& o! &h#s per#o$= 9e@ oo; a& &he John Case Co%pany case &ha& #s an eAa%p e o! a %ana(e%en& :"y1o"& ,MBO/. The sen#or %ana(e%en& o! &he !#r% has &he oppor&"n#&y &o :"y &he co%pany !ro% #&s so e o9ner. The as;#n( pr#ce #s J)* %# #on. The 9o" $1:e p"rchasers can %"s&er on y J3**=***G &here!ore= &he (ro"p 9# :e !ace$ 9#&h &he cha en(e o! ra#s#n( &he :a ance !ro% eA&erna so"rces. Ana ys#s o! &he case re>"#res &ha& one $e&er%#ne &he a&&rac&#<eness o! &he :"s#ness. In par&#c" ar= s&"$en&s nee$ &o $e&er%#ne 9he&her &he presen& o9ners@ as;#n( pr#ce oo;s !a#r= an$ &o $es#(n a !#nanc#n( pac;a(e &ha& 9# %ee& &he nee$s an$ o:7ec&#<es o! a 9#$e <ar#e&y o! s"pp #ers o! !"n$s. In a$$#&#on= s&"$en&s %"s& es&a: #sh a :"s#ness p an &ha& 9# ena: e &he p"rchas#n( (ro"p &o rea #Be a sa&#s!ac&ory re&"rn on &he#r #n<es&%en&. A$op&#n( &he <#e9po#n& o! an a$<#sor &o Mr. Johnson an$ &he o&her %ana(ers= cons#$er &he !o o9#n( >"es&#ons as yo" prepare &he case6 5. Ho9 a&&rac&#<e #s &he :"s#ness &hey are p ann#n( &o :"yK Dha& are #&s ;ey opera&#n( an$ co%pe&#&#<e charac&er#s&#csK ). Base$ on &he $a&a #n case EAh#:#& 3= $oes &he J)* %# #on as;#n( pr#ce appear &o :e !a#rK -. Ho9 sho" $ &he %ana(e%en& (ro"p !#nance &he :"y1o"&K Can &he co%pany s"ppor& as %"ch as J54.3 %# #on o! $e:&K In #(h& o! &he !#r%@s eA#s&#n( e<e o! cash an$ %ar;e&a: e sec"r#&#es ,see case EAh#:#& )/= #s J54.3 %# #on #n $e:& rea y necessaryK 2. Dha& #s &he <en&"re cap#&a #s& #;e y &o re>"#re as a con$#&#on !or pro<#$#n( !"n$sK

3. Dha& &er%s an$ con$#&#ons sho" $ %ana(e%en& accep& on &he so"rces o! eA&erna !#nanc#n(K Are &he con$#&#ons on &he c"rren& co%%#&%en&s sa&#s!ac&oryK I! no&= ho9 9o" $ yo" s"((es& chan(#n( &he%K .. I! &he :"yo"& #s s"ccess!" = ho9 sho" $ Case s":se>"en& y :e %ana(e$K Sho" $ &he propose$ pro$"c& #ne eApans#on= !or eAa%p e= :e p"rs"e$K To conc "$e o"r sess#on= I 9# $#sc"ss &he <a "a&#on an$ !#nanc#n( #ss"es conc"rren& y !ac#n( He ph# Corpora&#on as #& a&&e%p&s &o e%er(e !ro% :an;r"p&cy 9#&h %" &#p e cons&#&"enc#es &o sa&#s!y #n #&s cap#&a s&r"c&"re. Stude$ts .&" .is& t" 4",u$teer '$ "r', !rese$t'ti"$ "- t&eir ter# !r";e(ts i$ sessi"$ 9 s&"u,d ',ert #e *e-"re "r *% t&is (,'ss1 Sessi"$ 9) De(1 12 In &h#s sess#on= 9e 9# cons#$er &he e(a ?(o<ernance an$ e&h#ca #ss"es pose$ :y MCA &ransac&#ons= :o&h !r#en$ y an$ hos&# e. I& #s #%por&an& &ha& !"&"re CEO@s= CFO@s an$ H#rec&ors "n$ers&an$ &he e(a !ra%e9or; #n 9h#ch &hey 9# :e re>"#re$ &o opera&e. Rea$ &he Van Gor;"% an$ Re< on cases an$ &he %a&er#a !ro% &he He a9are Corpora&#on La9. Be prepare$ &o $#sc"ss ho9 &hese pr#nc#p es %#(h& :e app #e$ &o cer&a#n o! &he cases 9e ha<e a rea$y cons#$ere$. De 9# a so oo; a& &he e(a an$ e&h#ca $#%ens#ons o! #ns#$er &ra$#n( 9hen 9e cons#$er &he Anhe"ser1B"sch an$ Ca%p:e Ta((ar& Inc. case. Th#s case concerns &he $ec#s#on !ace$ :y &he (enera co"nse o! Anhe"ser1B"sch a:o"& 9he&her he sho" $ !# e s"#& a(a#ns& any par&#es respons#: e !or #ns#$er &ra$#n( #n Ca%p:e Ta((ar&= an ac>"#s#&#on &ar(e& o! Anhe"ser1B"sch. De@ &ry &o ;eep &he $#sc"ss#on a9ay !ro% &echn#ca e(a po#n&s :y cons#$er#n( &he !o o9#n( #ss"es6 5. Hoes #& appear &ha& anyone $#$ any&h#n( # e(a #n &h#s caseK Une&h#ca K DhoK Dha&K ). Ho9 9as Anhe"ser1B"sch $a%a(e$ #n &h#s #nc#$en&K Ho9 %#(h& yo" (o a:o"& assess#n( &he econo%#c $a%a(e $"e &o #ns#$er &ra$#n(K Can &he s&oc; h#s&or#es #n &he case :e "se$ &o assess &he $a%a(es #n &h#s caseK ,Yo" can ass"%e &ha& &he ans9er #s yes. The cha en(e #s &o "se &he case $a&a &o co%e "p 9#&h a $o ar a%o"n&./ Ho9 9o" $ yo" assess &he nonecono%#c $a%a(eK -. Ins#$er &ra$#n( #s <#e9e$ as an eA&re%e y ser#o"s pro: e% #n &he Un#&e$ S&a&es. Ho 9e &a;e #ns#$er &ra$#n( &oo ser#o"s yK Dhy $on@& 9e 7"s& a o9 !o ;s &o &ra$e on &he :as#s o! #ns#$e #n!or%a&#onK .. To 9ho% #s Anhe"ser1B"sch respons#: e !or #n &h#s #nc#$en&K Dha& sho" $ Mr. S"hre $oK

F#na y= rea$ &he %a&er#a s presen&e$ concern#n( op&#ons :ac;$a&#n(. Be prepare$ &o $#sc"ss 9he&her &he Boar$ o! App e= Inc. sho" $ cons#$er $#s%#ss#n( S&e<e Jo:s. I no&e #n an ar&#c e &ha& Jo:s has :een s":poenae$ :y &he SEC recen& y. For background reading on the regulatory and legal aspects of mergers, see Section 7 in the monogram. F#na y= 9e 9# "se &he as& ha ! o! &h#s c ass &o hear s&"$en& presen&a&#ons o! &he ac>"#s#&#on &ransac&#on s&"$#e$ #n &he#r c ass pro7ec&. 'resen&ers sho" $ p an a 5*1%#n"&e $#sc"ss#on o! &he s&ra&e(#c p"rposes o! &he $ea an$ &he#r assess%en& o! #&s prospec&s !or s"ccess. S&"$en&s 9ho <o "n&eer !or &hese presen&a&#ons 9# rece#<e eA&ra cre$#& on &he pro7ec& (ra$e.

TERM RO<ECT

Each s&"$en& %"s& ana yBe a reren& %er(er &ransac&#on se ec&e$ !ro% &he a&&ache$ EAh#:#& A ,or c eare$ 9#&h 'ro!essor En( ar/. Se ec&#ons %"s& :e noted &o &he pro!essor no later than &he en$ o! &he secon$ c ass %ee&#n(. An ana ys#s %ee&#n( &he cr#&er#a an$ !or%a& %"s& :e &"rne$ #n :y Hece%:er 4. Th#s ana ys#s 9# co"n& !or 2*F o! &he co"rse (ra$eG the amount of time and energy you place in this project should reflect its relative weighting in the final grade. Iss"es &o :e a$$resse$

I$en&#!y &he par&#es &o &he &ransac&#on= #nc "$#n( a!!# #a&es #! re e<an&. S&a&e &he s&ra&e(#c o:7ec&#<es o! each par&y. Assess 9he&her &he &ransac&#on 9# %ee& &hese s&a&e$ o:7ec&#<es. Dha& #s &he s&r"c&"re o! &he &ransac&#onK Dhy $oes #& appear &ha& &h#s par&#c" ar s&r"c&"re 9as chosenK Dha& a &erna&#<es %ay ha<e :een cons#$ere$ an$ 9hy %ay &hey ha<e :een re7ec&e$K Ho9 has &he &ar(e& :een <a "e$K Co%%en& on &he appropr#a&eness o! &he apparen& %e&ho$ an$ a &erna&#<esK Dha& syner(#es $#$ &he par&#es #$en&#!yK Ho &hese appear &o :e rea #s&#cK In yo"r pro1 !or%a !#nanc#a s ,see :e o9/= &h#s sho" $ :e a ;ey #ne #&e% #n 9h#ch yo" a&&e%p& &o assess a<a# a: e #n!or%a&#on &o <a "e an$ re! ec& &he syner(#es. Dha& are &he econo%#c ,a!&er1&aA/ conse>"ences &o each par&?cons&#&"ency o! &he &ransac&#onK Dha& re(" a&ory h"r$ es s&an$ #n &he 9ay o! a s"ccess!" co%p e&#onK Dha& are &he ;ey #ss"es &o o<erco%eK L#s& %a7or #%p e%en&a&#on s&eps ,a& eas& 3/ an$ o"& #ne a &#%e&a: e. Hypo&hes#Be 9ha& #ss"es 9# :e &he %os& $#!!#c" & &o o<erco%e #n co%p e&#n( &he &ransac&#on an$ #%p e%en&#n( a s"ccess!" #n&e(ra&#on. Dha& #%pac& 9# &he &ransac&#on ha<e on :o&h %ana(e%en& &ea%sK Spec" a&e on 9ha& &he %os& $#!!#c" & #ss"es 9ere?areK Hescr#:e &he #ss"es #n &he HR?:ene!#&s area &ha& %"s& :e a$$resse$. Ho yo" perce#<e any e&h#cs?(o<ernance #ss"es #n &h#s &ransac&#onK Dha& are &he ;ey s"ccess !ac&ors #n &he &ransac&#onK Hypo&hes#Be 9ha& r#s;s eA#s& an$ 9ha& "n!oreseen c#rc"%s&ances %#(h& occ"r &ha& 9# ca"se &he &ransac&#on &o !a# or no& %ee& &he s&ra&e(#c o:7ec&#<es. Crea&e a::re<#a&e$ pro1!or%a !#nanc#a s&a&e%en&s !or &he &ransac&#on. Ana yBe= #n $ep&h= one #ne #&e% &ha& appears &o :e &he %os& %a&er#a ,syner(#esK/. An eAa%p e 9# :e pro<#$e$ #n &he !#rs& c ass %ee&#n(. These %ay :e a<a# a: e #n &he SEC !# #n(s N !#ne6 a::re<#a&e &he% an$ $e%ons&ra&e yo"r "n$ers&an$#n( o! &he ;ey #ss"es. Conc "$e yo"r ana ys#s 9#&h yo"r !orecas& !or &he s"ccess o! &he &ransac&#on. Yo" 9# presen& &h#s #n &he as& c ass sess#on.

Me&ho$o o(y Beca"se &hese are recen& &ransac&#ons= cons#$era: e #n!or%a&#on eA#s&s #s SEC !# #n(s= press re eases= ana ys&s repor&s an$ :"s#ness ne9s %e$#a. Yo" are eApec&e$ &o re<#e9 &hese %a&er#a s an$ c#&e &he%. As on( as yo" %a;e re!erence &o yo"r so"rce,s/= e.(. co%pany proAy or Business eek ar&#c e PPPPPPP = $a&e$ PPPPPPP= yo" are !ree &o a$op& &he #$eas an$ op#n#ons o! o&hersG eAac& c#&a&#ons an$ >"o&a&#ons are no& necessary. I& #s yo"r assess%en& o! &he op#n#ons an$ !ac&s yo" access an$ %arsha &o $ra9 yo"r conc "s#ons &ha&

5*

9# $r#<e yo"r (ra$e. Th#s #s &he essence o! (oo$ %ana(e%en& #n &he MCA !#e $ ,an$ o! s"ccess!" #n<es&#n(/. Ana yses sho" $ :e %ore &han 5* :"& ess &han ). pa(es= p "s eAh#:#&s. Fo o9 &he se>"ence se& !or&h a:o<e. Yo" %ay a&&ach as %any s"ppor&#n( eAh#:#&s &o yo"r ana ys#s as yo" 9#sh= :"& &hese are no& re>"#re$ an$ yo" 9# no& :e (ra$e$ on &he% ,o&her &han &he pro !or%a !#nanc#a s/. F#<e s&"$en&s 9ho <o "n&eer 9# presen& &he#r pro7ec& #n po9erpo#n& !or% a& &he as& c ass. An a"&o%a&#c ha ! s&ep "p #n &he#r pro7ec& (ra$e 9# :e re9ar$e$.

EAh#:#& A Mer(er Transac&#ons F#nanc#a Ban; o! A%er#caQMBNA Dacho<#aQSo"&hTr"s& L#nco nQJe!!erson '# o& C#&#(ro"pQN#;;o Cor$#a ,Japan/ Dacho<#aQGo $en Des& Dacho<#a111AGE$9ar$s Ban; o! ne9 Yor;QMe on U&# #&#es H";e Ener(yQCyner(y Co%%"n#ca&#ons 55

 SBCQATCT Ver#BonQMCI ATCTQBe So"&h Transpor&a&#on A%er#ca Des&QUSA#r9ays In$"s&r#a ?IT Che<ronQUnoca Conoco'h# #psQB"r #n(&on Reso"rces Bos&on Sc#en&#!#cQG"#$an& Ho%e Hepo&QH"(hes S"pp y Orac e111Se#:e Orac eQHyper#on So "&#ons Freepor&1McMoranQ'he ps Ho$(e An$ar;oQIerr1McGee M#croso!&QaR"an&#<e F eA&ron#csQSo ec&ron Cons"%er H#sneyQ'#Aar Dho e Foo$sQD# $ Oa&s S#r#"sQSM Sa&e #&e Ra$#o AC'Q'a&h%ar; T#%e DarnerQEMI CVSQCare%ar; Bro9n For%anQHerra$"ra A%:e<QIn&er:re9 JCJQ'!#Ber cons"%er pro$"c&s Co;eQEner(y Bran$s G o:a IBMQLeno<o BASF111En(e har$ L"cen&11A ca&e 5)

E.On AGQEn$esa S"eBQGaB $e France M#&&a QArce or S&a&o# QNors; Hy$ro Bayer NScher#n( Ss&ra&aQFa con:r#$(e L#n$eQBOC Gro"p ,UI/ Tho%son111Re"&ers A;so No:e QI%per#a Che%#ca RBS or Barc ays an$ ABN A%ro ,Bo!AQLaSa e/ My anQGener#c $r"( "n#& o! Merc; IGaA Un#Cre$#&QCap#&a #a ,I&a y/ US S&ee QS&e co ,Can/ HanoneQN"%#co ,Fr/ A can

'r#<a&e E>"#&y?He$(e F"n$s HCA Harrah@s C ear Channe I#n$er Mor(an Freesca e Se%#con$"c&or Un#<#s#on Lear He ph# Ca: e<#s#on E>"#&y O!!#ce proper&#es Topps ,:y M#chae E#sner@s Tornan&e/ Chrys er Ba"sch C Lo%: TSU 5-

 F#rs& Ha&a Sp#no!!s H";e Ener(yQSprec&ra Ener(y A &r#aQIra!& or #n&erna&#ona &o:acco

Case Dr#&1"p For%a& In&ro$"ce ;ey #ss"es !ro% &he case. Ho no& repea& a& en(&h !ac&s o! &he case. ,5 pa(e/ H#sc"ss s&ra&e(y #ss"es o!!ere$ :y &he case ,51) pa(es/. Assess &he pos#&#ons o! &he co%pan#es= "s#n( SDAT or o&her &oo s as appropr#a&e. Ana yBe ;ey #ss"es. I! <a "a&#on ana ys#s #s re>"#re$= eAp a#n 9h#ch %e&ho$s are "se$ an$ 9hy. H#(h #(h& ;ey ass"%p&#ons "se$ an$ 9hy. App y res" & &o case. ,)13 pa(es/. Be s"re &o ans9er a >"es&#ons pose$ a:o<e. Ho9e<er= yo" $o no& ha<e &o !o o9 &he or$er #n 9h#ch ra#se$. F#& &he% #n&o yo"r ana ys#s. Va "a&#on ca c" a&#ons sho" $ :e #n an appen$#A.
52

Co%%en& on process= $oc"%en&s= #%pe$#%en&s ,an&#&r"s&= e.(./ ,5 pa(e/ No&e any e&h#ca #ss"es an$ s"%%ar#Be ,5 pa(e/. To&a 9r#&e1"p ,eAc "$#n( appen$#ces?eAh#:#&s/ sho" $ :e 015* pa(es. Inc "$e s&a&e%en& o! co%p #ance 9#&h Bryan Honor Co$e.

53