THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS School of Economics and Finance MFIN7010 Mergers and

d Acquisitions Semester B, 2011/2012

ILO1: Be able to understand the process and economic rationale for M&As. ILO2: Be able to understand typical valuation techniques in M&As. ILO3: Be able to apply the valuation techniques to M&A assessment and decision-making. ILO4: Have acquired analytical skills in analyzing real-world cases in M&As. ILO5: Have developed skills in group work, including communication, collaboration, and presentation.

I. Information on Instructor Instructor: Phone: E-mail: Office hour: Dr. Xianming ZHOU 2857 8564 xianming.zhou@hku.hk By appointment

IV. Alignment of Program and Course Outcomes Program Learning Outcome 1. To master current theory and knowledge in the field of economics 2. To master the skills to deal with economic data 3. To develop the ability to apply economics to real world problems 4. To develop global and regional outlook and astuteness Course Learning Outcome ILOs 1, 2 and 3 ILO 4 ILOs 4 and 5 ILO 4

II. Course Description and Objectives Objectives: This course is designed to develop a solid understanding of commonly discussed and applied issues in merger and acquisitions (M&As). The topics covered in this course include the M&A process, methods of valuing a target firm, valuing synergies, the form of payment and financing, assessing the highly levered transaction, governance in M&A, and M&A negotiation. Cases in M&As will be used in the discussion of the various topics. By going through analyses and discussions of real-life M&As, students will gain experiences in the application of financial theory and techniques to evaluate a M&A decisions and transactions. Prerequisites: This course is fast-paced and challenging. I assume that you have basic training in corporate finance. In other words, you are familiar with such concepts and theories as risk, return, capital budgeting, discounted cash flow, cost of capital, etc. The course will be rigorous and demanding. Your learning will crucially depend on the amount of time and effort you commit. Course Materials: Class notes and assigned readings will be distributed in class. Related M&A cases (from Harvard Business School and Darden School of Business) will also be provided. While the course will not closely follow any single textbook, you can find useful reference regarding basic corporate finance theories and valuation techniques from any commonly used advanced corporate finance textbooks (e.g., Ross, Westerfield, and Jaffe, 2010, Corporate Finance, 9th edition, McGraw-Hill).

V. Teaching and Learning Activities Lectures on Major Concepts and Issues: Interactive lectures with power-point slides will be conducted with the lecturer explaining and illustrating the concepts and analytical skills. Students will be invited for active participation for in-class discussion, to share their views and experiences in applying the concepts. Major focus: ILOs 1, 2 and 3 Assignments: Selected review questions will be assigned for students to practice and gain better understanding of the concepts discussed. The assignments will be graded. Major focus: ILOs 1, 2 and 3 Case Analysis: Students will form case-study groups. For each case, each study group will analyse the case in advance, submit an analysis following the given study questions, and actively participate in class discussion. Major focus: ILOs 1, 2, 3, 4 and 5

III. Intended Learning Outcomes (ILOs) On completion of this course, students should:

VII. Assessment Assessment Method 1. Lecture attendance and participation 2. Assignment 3. Case analysis and discussion 4. Final exam Weighting 10% 16% 24% 50% Total: 100% ILOs ILOs 1, 2 and 3 ILOs 1, 2 and 3 ILOs 1, 2, 3, 4 and 5 ILOs 1, 2, 3 and 4

Case Analysis and Discussion (24 points): This component will be graded based on two dimensions: Group contribution in case discussion (70%), and submitted case analysis (30%). Grading Criteria A
Excellent or very good ratings on all three criteria

B
Good to very good ratings on some or all three criteria

C
Fair to good ratings on some or all three criteria

D
Fair ratings on all three criteria.

F
Absent from case discussion or fail to submit the case report

VII. Standards for assessment Attendance and Participation (10 points): Attendance will be taken for the lectures. The attendance and individual contribution in class discussion will be the main factors in assigning points for this component. Grading Criteria A
Well prepared for class discussion, very active in sharing views, and attended at least 90% of classes

Final exam (50 points): Grading Criteria A

90%

B
75% ~ 90%

C
60% ~ 75%

D
50% ~ 60%

F
50%

B
Reasonably prepared for class discussion, quite active in sharing views, and attended at least 80% of classes

C
Not well prepared for class discussion, limited sharing of views, and attended at least 70% of classes

D
Not well prepared for class discussion, no sharing of views, and attended at least 60% of classes

F
No preparation for class discussion, no sharing of views, and attend less than 50% of classes

VIII. Academic Conduct The University Regulations on academic dishonesty will be strictly enforced. Please check the University Statement on plagiarism on the web: http://www.hku.hk/plagiarism/ Academic dishonesty is behavior in which a deliberately fraudulent misrepresentation is employed in an attempt to gain undeserved intellectual credit, either for oneself or for another. It includes, but is not necessarily limited to, the following types of cases: Plagiarism: The representation of someone elses ideas as if they are ones own. Where the arguments, data, designs, etc., of someone else are being used in a paper, report, oral presentation, or similar academic project, this fact must be made explicitly clear by citing the appropriate references. Cheating on In-class Exams: The covert gathering of information from other students, the use of unauthorized notes, unauthorized aids, etc.

Assignment (16 points): Grading Criteria A

90%

B
75% ~ 90%

C
60% ~ 75%

D
50% ~ 60%

F
50%

IX. Course Schedule Week (Date) 1 (May 14) 2 (May 16) 3 (May 21) 4 (May 23) 5 (May 28) 6 (May 30) 7 (June 4) 8 (June 6) 9 (June 11) 10 (June 13) 11 (June 18) 12 (June 20) Topic Introduction of course, overview of M&As Business valuation M&A process, financing, synergy valuation Case 1. Arcadian (business valuation) Case 2. Pinkerton (A) (method of financing) Cross-border M&A, corporate governance issues Case 3: Vodafone AirTouchs for Mannesmann Valuing the highly levered firm Case 4: Valuing a Cross-Boarder LBO: Bidding on the Yell Group Equity swap, negotiating the deal Case 5. M&A negotiation (to be announced) Review; in-class test Readings and cases Lecture notes & readings Lecture notes Lecture notes Darden case HBS case Lecture notes HBS case Lecture notes HBS case Lecture notes Darden case