Course Title: FBE 560: MERGERS AND ACQUISITIONS Syllabus for Spring 2012 Professor: Lloyd Levitin Office

: Acc. 301E Office Phone: 310-740-6524 E-mail: levitin@marshall.usc.edu

Lecture Class Thursday Office Hours Mondays Thursdays

6:30 – 9:30 P.M.

Room: JKP 210

11:00 – 11:45 A.M. 2:30 – 4:45 P.M.

Introduction and Course Objective The primary objective of the course is for each student to gain a well-rounded understanding of the major strategic, economic, financial, human resources, and governance issues of mergers, acquisitions, and restructuring. The M&A environment is a fast-paced, highly complex world where transforming transactions can have a major impact on both domestic and global economies and the consequences of error are large. Given the generally high level of mergers and acquisitions and their important role in the economy and in corporate strategy, it is likely that each of you will have some contact with mergers and acquisitions at some point early in your careers. This course is designed to provide you with a competent foundation in all areas of M&A practice, with an emphasis on the “best practices.” Learning Objectives This course will help you to:  Understand the role that M&A plays in the contemporary global market, and its use as a strategic tool to provide growth, enhance competitive position, transform a company or industry, and create shareholder value.  Develop a framework that can be used for analyzing M&A transactions including understanding strategic rationale, valuation methodologies, deal structures, bidding strategies, and the need for a value proposition.  Know how M&A can be used successfully as well as its pitfalls, dangers and risks.  Foster an understanding of the M&A process from target selection to doing the deal (including due diligence, integration planning, negotiating the agreement, announcing the deal), to closing and integration.  Have an understanding of commonly used takeover tactics and defenses.  Choose a path for restructuring that will meet corporate goals and create shareholder value.  Understand the practical limitations of the various valuation approaches.  Manage the deal structuring process to minimize the risk that a merger or acquisition will not meet expectations.  Know when alliances or joint ventures are preferable alternatives to mergers and acquisitions.

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investment banking.. We begin each session with a discussion of current events. including corporate development. He has a MBA from Wharton and a JD from University of San Francisco.Who Should Take This Course The course is suitable for any Marshall MBA candidate who desires a basic knowledge of M&A transactions in order to do effective work in a wide range of fields. and was actively involved in the firm’s diversification program which included numerous acquisitions. He was Executive Vice President and CFO of Pacific Enterprises from 1982-1995 (now Sempra Energy). The course is most suitable for students considering careers in finance.  A course packet that contains the assigned cases and articles (available at the USC Bookstore). Grading Summary: Assignments TESTS Mid-Term Final Exam Points 25 35 24 6 10 TOTAL 100 % of Grade 25. 2004.S. corporate finance. case discussions and lectures. Congress and has been a consultant for JurEcon. Inc.0% 10.nytimes.0% 100. and as an attorney after receiving his JD.0% 4 CASES (6 points each) CLASS PARTICIPATION PEER EVALUATION Final grades represent how you perform in the class relative to other students.0% 35. group projects. Prerequisite GSBA 521 or GSBA 521b or GSBA 548. Each session will involve class discussion based on the lectures or assigned cases. Teaching Methods This course is taught through a combination of readings.com before each class to obtain a grasp of recent news. a nationwide consulting and research firm for management and counsel.0% 24. and consulting. He testified as an expert on utility diversification to the Senate Finance Committee of the U. but on your performance. Wiley. He practiced as a CPA after receiving his MBA. About the Instructor Lloyd Levitin is a Professor of Clinical Finance and Business Economics at Marshall. Your grade will not be based on a mandated target.0% 6. You are encouraged to visit dealbook. Course Notes: Copies of lecture slides and other class information are available through your Blackboard account. Three items are considered when assigning final grades: 2 . Required Materials  Applied Mergers and Acquisitions. by Robert Bruner.

and explain fully and 3 . you must let me know. so you can consult your results during the class discussion. Each group should submit two to three pages (and not a single page more) memorandum of analysis and recommendations covering the case study questions. Cases (24% of your grade). Be sure to indicate how you arrived at your conclusions. but for some others. 3. real world problems. Attach the original assignment to the memo. Since these assignments are graded on a competitive basis. I care about the thinking process and your logic behind your answer. one week before the case is due I will provide you with some of the financial analysis necessary to work the case so that you feel comfortable and competent in analyzing the case questions. make arrangements for it to be delivered to the classroom or to my mailbox by the start of class. Understanding the M&A material is important but being able to explain them to your boss or decision maker is equally important. You are to email the members of your group to me by February 22. Therefore. as well as my expectations for the write-up. If you feel that an error has occurred in the grading of any assignment. 2. If you have questions about the cases. specifically coming from different programs and careers. The overall average percentage score within the class. There are four assigned cases set forth on the CLASS SCHEDULE AND ASSIGNMENTS. You are to prepare answers to the case discussion questions set forth on pages 6 and 7 and hand in a hard copy at the beginning of the appropriate class. write me a memo in which you request that I reevaluate the assignment. Your average weighted score as a percentage of the available points for all assignments (the points you receive divided by the number of points possible). If you are unable to attend class on that day. Brevity is a virtue for case write-ups. you may. plus any accompanying exhibits you wish to include as appendices. within one week of the date the assignment is returned to you. Case assignments must be turned in on the due date during class time shown in the Class Schedule. If you have problems finding a group. please raise your questions in class. and notify the welcoming group. This timetable is designed to give you the opportunity to apply the concepts and materials you have learned in the first 11-12 weeks of the course to complex. it would be unfair to give special help to any one individual or group during office hours or by email. Start each paragraph with a number referring to the question you are answering. For some of you the financial material included in the case will be fresh. and I will assign you to groups already formed.1. Any assignment turned in late will receive a grade deduction. Bring two copies with you. Do not repeat the facts of the case unless necessary to your answer. Failure to follow this procedure will result in your doing the cases without team members. it will rusty (or even very rusty). You should form groups of 4-6 students to work on the assigned cases. One of the challenges of a merger and acquisitions course is that students’ backgrounds are generally very different. Write these as if you were writing for the CEO or major decision maker in the case. All cases are due in the last 4 weeks of the course. It is important that you include your name on the cover sheet of each assignment so that all members get credit. Your ranking among all students in the class.

human nature being what it is. 165-167. Class meetings will involve discussions of the assigned readings and cases. Class Participation (6% of your grade). and sharpening a student’s ability to communicate to others. Any team member who does not email his (her) evaluation of team members will be deemed to have given a 10 point score to each member of the team. Class scheduled for April 12th is cancelled. Readings in Course Packet: (1) Methods of Valuation for Mergers and Acquisitions (2) Notes on Mergers and Acquisitions and Valuation Lecture and Discussion Topics Week 1 1/12 Week 2 1/19 Introduction to M&A Strategy Week 3 1/26 Week 4 2/2 Acquisition Process Valuation 4 . In order to provide an incentive for all students to make maximum contributions to the study group. none. Attendance and participation are essential for success in this course. Preparation for each class is essential. I will have no other way to determine who is present and participating. or negative. and Due Dates For Cases Bruner: Chapter 4 (Pages 69-91) and Chapter 5 Bruner: Chapter 6 (pages 123-148. which will be videotaped for those students unable to attend. Study groups provide a valuable learning experience – how to work effectively and efficiently in groups (a common practice in Corporate America). Be aware that the re-evaluation process can result in three types of grade adjustments: positive. Readings. This evaluation is to be submitted by email to the Instructor before the last day of classes. students will be asked to grade each team member’s contributions on a 0 to 10 point scale. CLASS SCHEDULE AND ASSIGNMENTS Tasks. Class Cancelled. Readings in Course Packet: (1) Note on Corporate Strategy (2) Strategies of Unrelated Diversification (3) When to Ally and When to Acquire (4) To Diversity or Not to Diversify Bruner: Chapters 25 and 29 Bruner: Chapter 11. learning from others. . A make-up class will be scheduled in the following week. In evaluating your class participation I will consider the quality and frequency of your participation. some students are tempted to relax and let others carry their load. Students are required to display their name cards in each class. 168-176).carefully why you think the assignment should be re-graded. Students are expected to actively participate in the class discussions. with a clear emphasis on quality. However. Peer Evaluation (10% of your grade).

’s Entry Into Entertainment Industry Time Inc. Restructurings 167-168). Reading in Course Packet: (1) Divestiture: Strategy’s Missing Preliminary discussion of case Time Inc. Readngs in Course Packet: “Pitch Book”: Proposed Acquisition of Heller Financial by United Technologies Corporation. Reading in Course Packet: Stock or cash? The Trade-offs for Buyers and Sellers in Mergers and Acquisitions Bruner: Chapter 22 (pages 609-622). Readings in Course Packet: M&A Legal Context: Basic Framework for Corporate Governance Bruner: Chapter 8 (pages 207-228) Bruner: Chapter 30 Reading in Course Packet: The Fine Art of Friendly Acquisition Bruner: Chapter 31 Bruner: Chapter 29 Bruner: Chapter 35. Readings. and Due Dates For Cases Bruner: Chapters 18.’s Link Entry into the Entertainment Industry (2) The Strategic Secret of Private Preliminary discussion of case Philip Morris Equity Companies & Kraft Case USX Corporation Case Write-Up Due Class discussion of USX Corporation case Class discussion of Time Inc. Reading in Course Packet: Making the Deal Real: How GE Capital Integrates Acquisitions Week 11 3/29 Week 12 4/5 Securities Law Applicable to M&A Bruner: Chapter 27 Antitrust Law Bruner: Chapter 28 Preliminary discussion of USX Corporation Case Bruner: Chapter 6 (pages 148-165. Bruner: Chapters 32. Bruner Chapter 35.Lecture and Discussion Topics Week 5 2/9 Deal Structure Tasks. 19 and 20.’s Entry Into Entertainment Industry Case WriteUp Due Week 13 4/12 5 . 33 and 34 Week 6 2/16 Deal Structure (continued) Week 7 2/23 Due Diligence Negotiation Auctions Documenting the Deal Week 8 3/1 MIDTERM (Covers assigned material and lectures for first 7 weeks) Communications Week 9 3/8 3/12-3/17 Week 10 3/22 Hostile Acquisitions Spring Recess Integration Bruner: Chapter 36 and Chapter 24. Chapter 23 (pages 636-651) and Chapter 26.

and Due Dates For Cases Philip Morris Companies & Kraft Case Write-up Due Acquisition of Consolidated Rail Corp. Cases (A) and (B) FINAL EXAM 7:00-9:00pm Tasks. or instead to a broader set of constituencies that includes the firm’s various corporate stakeholders (e. employees. to assess whether it is being undervalued by the stock market? 2.Lecture and Discussion Topics Week 14 4/19 Preliminary discussion of Acquisition of Consolidated Rail Corp. 4. (A) and (B) Cases Write-Up Due 5/3 ASSIGNED QUESTIONS FOR CASE WRITE-UP Case 1: USX Corporation 1. As a financial analyst.. Cases (A) and (B) Class discussion of Philip Morris Companies & Kraft Case Week 15 4/26 REVIEW Class discussion of Acquisition of Consolidated Rail Corp. Readings. What problems does a financial analyst encounter in making such an analysis as to whether a multi-business company like USX is undervalued by the stock market? 3. Should managers be responsible only to stockholders. how would you go about trying to value a multi-business company like USX. For what kinds of companies is targeted stock most appropriate? Least appropriate? 5.g. the community)? 6 . Which restructuring option – Icahn’s spin-off proposal or the company’s targeted stock proposal – will create the most value for shareholders? For creditors? Explain your answer. creditors.

How did the stock market assess Philip Morris’s $90 per share bid for Kraft? Was this stock market assessment justified? 2. Why did CSX include and Conrail agreed to the no-talk clause. In a bidding war. Philip Morris acquired Kraft at $106 per share. lock-up options.50 per share in the first stage offer.’s Entry Into The Entertainment Industry (A) 1. 1.’s shareholder. Was John Richman a failure? Case 4: The Acquisition of Consolidated Rail Corporation (A) 1. who should be willing to pay more. Should Philip Morris buy Kraft? Answer the question from the viewpoint of Hamish Maxwell and also from the viewpoint of a shareholder of Philip Morris. Inc.? 2. As a Conrail shareholder you can tender your shares to CSX at $92. What are the arguments for and against tendering your shares? The Acquisition of Consolidated Rail Corporation (B) 1.Case 2: Time Inc. What were Time’s options after getting the Paramount bid? Case 3: Philip Morris Companies & Kraft. and poison pill shareholder rights plan? Who benefits and who loses from their use? 2. would you agree to the Kraft Restructuring Plan? Why or why not? 4. break-up fee. Is Conrail worth more to Norfolk Southern or CSX? 2. As a Time Inc. Norfolk Southern or CSX? 7 . How does Munro justify his decision to reject the Paramount offer at the annual shareholders’ meeting of Time Inc. 3. If you were on the Kraft’s Board of Directors. what do you think of Munro’s decision to reject the Paramount offer? 3.

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