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LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT,DELHI

Two Year Full-Time Post Graduate Diploma in Management

Course Code: 224124 Course : Mergers and Acquisitions


Academic Session: Faculty : Dr. Anshu Agrawal

Learning Objectives:
 Equipping the students to understand the rationale for the process of Corporate
Restructuring , Mergers and Acquisitions and other Techniques.
 Due Diligence and evaluation of target firms,
 Cross Border acquisitions
 Valuation of companies, methods of payments and financing in M & A.
 Post-merger integration including HR issues in cultural integration.
 Legal processes in M & A , SEBI regulatory requirements, Tax and accounting aspects.

Session Plan
Module Session Topic
1. 1-2 Introduction – Rationale for M & A
 Framework for Mergers & Acquisitions,
 Major types of Mergers and Acquisitions;
 Motives and justification for mergers & acquisitions;
 Economic rationale for mergers, major rationale for major types
of mergers, Horizontal mergers, Vertical mergers, Conglomerate
mergers, Concentric mergers.
 Concept of Synergy- Various types of synergies.
 Approaches to formulating strategy;
 Due diligence of target firms
Readings:
Mergers, Restructuring and Corporate Control, PHI
J.Fred Weston, Kwang S. Chung and Susan E Hoag( Part-II, P.56-82
Prasad G. Godbole (IIMA). Mergers, Acquisitions and Corporate
Restructuring, Vikas Publishing, 2009; (P.3 to 8)

CASE :
Fast Track profit Model: Creating the new due diligence process for
mergers and acquisitions: Harvard Business Publishing;2008
Merger of Reliance Petroleum With Reliance Industries Ltd.
2. 3 Theories of Mergers:
Efficiency theory, Operating Synergy, Pure Diversification, Information and
Signaling, Hubris Hypothesis, Free Cash flow Hypothesis.

Readings:
 Mergers and Acquisitions: Fred. J. Weston
 Trautwein, F. (1990). Merger motives and merger
prescriptions. Strategic management journal, 11(4), 283-295.
Case Study :Merger of Ponds India Ltd with Hindustan Lever Ltd. ( A
Case on Legal Processes in M &A )
3. 4-6 Accounting and Tax Implications:
 Accounting aspects in Mergers & Acquisitions
 Bootstrapping
 Calculation of post-merger value and gain to acquirer and target
 Tax implications in M & A.
 Cash vs. stock financing

Readings:
 Prasad, G. Godbole ,IIMA,Mergers, Acquisitions and Corporate
Restructuring, , Vikas Publishing. Ch. 12 and Ch 13, P. 175-204
 A Note on Tax and Accounting issues in mergers and acquisitions:
Harvard Business Publishing
 Exercises in Tax and Accounting aspects
4 7-8
Deal structuring and financial strategies
 Deal structuring process
 Acquisition vehicle and post-closing organization
 Legal form of selling entity
 Tax and accounting consideration
Readings:
Donald M. De Pamphills

5 9-10 Value Creation by restructuring


Forms of Corporate restructuring- Expansion, Mergers & Acquisitions,
Tender offers, Joint Ventures, Sell off, Split Off Spin Off Equity carve outs,
Divestures, premium Buy backs, Standstill agreements, Proxy contests, Share
repurchases, Exchange offers, Leveraged buy outs.
Going private as a Restructuring strategy, Using Atman model to predict
bankruptcy, Corporate Restructuring and turnaround of sick companies

Readings:
Prasad G. Godbole (IIMA). Mergers, Acquisitions and Corporate
Restructuring, Vikas Publishing, 2009; ( P.9 to 32)
J.Fred Weston. Mergers, Restructuring and Corporate Control,
P. 56-82, 190-to 223.

Case/ Reading: Mergers and Acquisitions: overcoming pitfalls, building


Synergies and creating value: (Hitt, King, Krishnan, Makri, Schijven,
Shimizu & ZHU 2009); HBS publishing

6 11 Executing Restructuring Process :


Management Buyout (MBO), Leveraged Buyout (LBO),
Friendly and Hostile Mergers.
Strategies and tactics in M & A.
Pre and post takeover defenses

Readings:
Mergers, Acquisitions and restructuring, Prasad G.Godbole(IIMA) Ch.5, 58-
68
Donald M DePamphilis Mergers, Acquisitions and other restructuring
Activities, Ch. 17, ( 649-680)
4. 12-16 Valuation of firms:
Measuring the discount rate: CAPM, WACC, Bond yield plus risk
premium, Gordon model, Fama French model, Ibbotson model.

Valuation of Financial securities, Valuation of Assets and liabilities,


Methods of Valuation: DCF (DDM/FCFF/FCFE) approach, Net Assets
Valuation Method, Book Value, Market Value, Replacement Value.
Comparable company and Comparable transaction approach, Accounting
Approach, Excess Earnings Approach, Capital Budgeting Approach,
Economic Value Added and Market value approach. Exchange Ratio,
Methods of Payment for M & A –Funding Options. Valuation Problems,
ESOPs.
Practical Exercises and Problems in Valuation.

Case Study :
Business Valuation in Mergers and acquisitions: HBS cases; Darden
Business Publishing; University of Virginia, October 2013.
Acquisition of Corus by Tata Steel ( A Case on Cross Border acquisition
and Funding Options for an acquisition)

5. 17 Compliance with Legal requirements:


Legal Processes in M &A; SEBI Takeover code and regulatory guidelines;
Competition Act -2002.

Readings:
Prasad, G. Godbole ,IIMA,Mergers, Acquisitions and Corporate
Restructuring, , Vikas Publishing. Ch. 12 and Ch 13, P. 175-204

A Note on Tax and Accounting issues in mergers and acquisitions:


Harvard Business Publishing
Exercises in Tax and Accounting aspects
6. 18 Challenges in M & A
 Factors for success and failures in M & A
 Post-merger and change management:
 Post-merger integration according to type of merger.
 Human aspects, implications of organizational and cultural changes in
M & A.
 Role of M & A teams in integration in M & A.
 Due diligence

Readings:
Part-II, Ch. 6 ( P. 205-231)

Case Study –
Merger of Indian Airlines with Air India “ Key Issues in Due Diligence
and Integration – Lessons Learnt.”

7.
19-20 Group Presentation and Evaluation

Suggested Readings

Compulsory:

 “Mergers, Restructuring & Corporate Control” by J. Fred Weston, Kwang S. Chung and
Susan E. Hoag (Prentice Hall India)
 “Takeovers, Restructuring and Corporate Governance” by J. Fred Weston, Kwang S.
Chung and Juan A. Siu (Prentice Hall)
 Valuation by Aswadh Damodaran (John Wiley)
 Financial Management- MY Khan and PK Jain Tata Mcgraw Hill.Mergers,
 Acquisitions and Takeovers- H.R. Machiraju, New Age International (P) Ltd.
 Mergers, Acquisitions and Corporate Restructuring by Prasad. Godbole-Vikas Publishing
House (P) Ltd.
 Corporate Restructuring-Enhancing Shareholder Value –Ranjan Das and Udyan Kumar
Bose- Tata Mcgraw Hill .
 Mergers ,Acquisitions and other Restructuring Activities- Donald M. DePamphilis-2010
By Elsevier Inc.

References:
 “Mergers et.al” Issues ,Implications and Case Laws by S.Ramanajum (Tata McGrow Hill)
 “Mergers & Acquisitions of Companies” by P. Mohan Rao (Deep & Deep)
 “Readings in Mergers & Acquisitions” by Patrick Vaughan (Blackwell)
 “Corporate Finance: Theory & Practice” by Aswath Damodaran ( John Wiley)
 “Exploring Corporate Strategy” by Garry Johnson & Kevan Scholes (Prentice Hall India)
 Cartwright, Sue and Cary L. Cooper (1996), Managing Mergers, Acquisitions and
Strategic Alliances: Integrating People and Cultures,Butterworth- Heinemann Ltd., Second
edition.
 Beckley, Peter J and Pervez N Ghauri (2002), International Mergers and Acquisitions- A
Reader, Thomson.
 Case Studies on Mergers and Acquisitions (2004), ICFAI Center for
Management Research.
 Advanced Corporate Finance –Chandrasekhar Krishnamurti and S. Vishwanathan PHI
Learning(P) Ltd.
 Mergers and Acquisitions from A to Z –Andrew J Sherman and Milledge A Hart.
 Valuation-Measuring and Managing the Value of Company Mckinsey and Co, Tom
Copeland ,Tim Koller.
 Law and Practice of Mergers and acquisitions Jayant M Thakur Snow white Publishers
 Corporate Mergers, Amalgamations and Takeovers-J.C.Verma –Bharat Publishing House

Evaluation Parameters
Unannounced Tests and quizzes 10 marks
Participation 05 marks
Project report 25 marks
Mid-term examination 20 marks
End term examination 40 marks

Pedagogy

The teaching methodology is a judicious blend of lectures, real life situation analysis, case
discussions and presentation by students of their project work and field study.

Self Study and Evaluation for Group Presentation :

1. Case Study : Acquisition of Zain Ltd. by Bharti Airtel Ltd.


2. Case Study : Acquisition of Novelis by Hindalco Ltd.
3. Case Study : Acquisition of Ranbaxy by Daiichi Sankyo.
4. Case Study : Acquisition of Hutchison Essar By Vodafone.
5. Case Study : Acquisition of Sahara Airlines by Jet Airways.
6.. Case Study : Acquisition of Jagaur Land Rover by Tata Motors Ltd.
7.. Case Study : Acquisition of Arcelor Steel by Mittal Steel Ltd..
8. Case Study : Acquisition of Satyam Ltd. by Mahendra and Mahendra.