Corporate Valuation and Restructuring
Course code
Semester
Credit
Facilitator
HS30202
Spring
3-0-0-3
Gourishankar S Hiremath, PhD
Department of Humanities and Social Sciences
Indian Institute of Technology Kharagpur
Kharagpur - 721302. India.
Email: gshiremath@hss.iitkgp.ac.in
Tel: +91 3222 283632
LinkedIn | Twitter: gsdastapur
Course Objectives
This course aims to acquaint the students with theories and financial analytical skills for company valuation. The course familiarizes the students with real-world situations. It equips
them to solve real-life valuations in various scenarios, including public companies, private equity, mergers & acquisitions, leveraged buyouts, and early-stage and family companies. This
course also helps recognize challenges to valuation in a dynamic economic environment. The
emphasis is to develop a theoretical understanding of the students, which enables students
to push the frontiers of knowledge in the company valuation and restructuring domain. The
course also attempts to impart rich analytical insights and understanding.
Learning outcomes
• This course aims to prepare students for investment banking, valuation, equity research,
and financial analyst profiles.
• After completion, the students are expected to appreciate the working of enterprise
valuation.
• The learning outcomes include understanding the DCF methodology, applying it for
live projects, and understanding the challenges of valuation in a dynamic environment.
• Develop a strong sense of potential and valuable areas for further research.
• Appreciate the meta-skills obtained during the course
Pedagogy
Pedagogy consists of case discussions, presentations of the students, and lectures. The course
stresses two-way communication of learning; hence, the onus placed on participants is more
than on the instructor. The course emphasizes flip classroom learning in which learning will
happen outside the classroom, and sessions will provide an environment to discuss the knowledge gained outside the classroom. Massive importance is given to the student’s preparation,
participation, and assignments. The students are expected to participate in synchronous and
asynchronous modes. The learning is primarily through the cases, in-class spreadsheet analysis, exercises, and articles. The role of the facilitator is to provide a learning environment.
Suitability
The course is appropriate for students looking for a career as an investment banker, equity
researcher, and financial consultant. Students with a more profound interest in valuation
with an objective to move to a decision-making position at the earliest find their career
objectives align with this course. A solid foundation in corporate finance coupled with
an aptitude for problem-solving intuition enables the students to analyze the cases. Critical
thinking combined with creativity to look beyond numbers will be added advantage. Owning
responsibility and participation in the discussion is essential. Familiarity with accounting
gives an edge.
Prerequisite waiver
The institute-prescribed prerequisite will be waived for students with a background in the
domain of finance/economics. The background is evaluated based on courses taken from the
institute or outside, including online certification, internship, or self-study.
Module 1: Philosophical Foundation Valuation
Learning objective
Familiarize the students and participants about the philosophical
foundation of valuation and its ethics
Concepts
Philosophy of value; application process; the framework for valuation; valuation ethics
Literature
Pinto et al. Chapter 1
Luehrman, T.A. 1997. What’s It Worth? A General Manager’s
Guide to Valuation. Harvard Business Review.
Submission
None
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Module 2: Fundamental Enterprise Valuation
Learning objective
To understand the fundamentals of enterprise valuation and familiarize students with balance sheets and financial ratios. The pairing
of industry names and profiles of financial data helps students draw
tentative inferences about patterns of operations and asset structures in different industries.
Concepts
Industry and company analysis; analysis of financial statements;
financial ratios; advantage horizon; earnings quality; financial analytics toolkit – projections, discount rates; adjusted present value
Case analysis
The Case of the Unidentified Industries-2018
Case summary
Helps students understand how the characteristics of a business are
reflected in its financial statements. This case consists of an exercise
in which students are given balance sheet data in percentage form
and other selected financial data for companies in 14 industries.
The specific task assigned to the student is to use the balance sheet
data along with their basic knowledge of the operating conditions
and characteristics of these 14 industries to match each industry to
the correct data.
Assignment
tions
Please identify the industries. You should be prepared to answer
questions on the meaning of each line of the balance sheet and your
reasoning for the choice for each industry.
Literature
ques-
Damodaran. Chapter 2
Pinto et al. Chapter 3;
Pinto et al. Chapter 4 (optional)
Submission
Spreadsheet or slides
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Module 3: Free Cash flow Analysis – FCF and CCF
Learning objective
To explore capital cash flow valuation in the context of a leveraged
buyout.
Concepts
Free cash flow to the firm; capital cash flow valuation
Case analysis
Berkshire Partners: Bidding for Carter’s
Case summary
A five-member team from Berkshire Partners must recommend a
final bid and financial structure for a leveraged buyout of William
Carter Co., a leading producer of children’s apparel. Investcorp,
a global investment group, has put the company up for auction.
Goldman Sachs, in addition to running the auction, was offering
"staple-on" financing. Under this arrangement, the winning bidder
would have the option to finance the deal through a prepackaged
capital structure.
Assignment
tions
Assess management forecasts, forecasting capital cash flows; estimating a discount rate, and comparing the rate to private equity
hurdle rates; estimating terminal value, and sensitivity analysis:
Study questions: How much cash flow will Carters generate in the
next five years (2002-2006) based on management estimates? How
realistic are management forecasts in light of Carter’s historical
performance? What should the Berkshire team Bid?
Literature
ques-
Pinto et al. Chapter 6; RB, Chapter 14
Lev, Baruch, 2015. Intangibles: Now More Important than Ever.
Harvard Business Review. Sep 15.
Gompers, P., and J. Lerner, 2000. Money chasing deals? The
impact of fund inflows on private equity valuation. Journal of Financial Economics 55(2), 281-325. [Reference]
Submission
Case analysis along with presentation slides; spreadsheets
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Module 4: Free cash flow analysis - ECF
Learning objective
To provide an opportunity to value Acova using the flows-to-equity
technique
Concepts
Free cash flow; equity cash flow valuation
Case analysis
Acova Radiateurs
Case summary
In March 1990, Baring Capital Investors faced a decision about
whether and how much to bid for Acova Radiateurs, a subsidiary
of Source Perrier. Source Perrier had decided to sell Acova, and
Baring Capital Investors thought it might make a good leveraged
buyout candidate.
Assignment
tions
Using the free cash flow to the equity method, assess the worthiness
of Acova. Suggested steps: 1) Calculate cash flow available 2) Find
equity cash flows 3) estimate terminal value; subtract book value
of outstanding debt to get terminal equity value 4) Compute the
IRR of the firm’s anticipated equity investment. Compare to the
hurdle rate.
Literature
ques-
Pinto et al. Chapter 6,
RB, Chapter 14
Submission
Case analysis along with presentation slides; spreadsheets
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1
Attendance and Leave Policy
We strongly encourage students to attend classes regularly and actively participate in debates
and discussions as it significantly enhances the learning experience. While absences are not
typically penalized, we offer incentives to students who demonstrate consistent attendance
and engagement in their coursework.
Since participation is part of the evaluation (6, 6.1), intimation of prolonged absence from
sessions helps us account for the component of class participation or arrange alternative
means of learning. It also helps us reach out to the student to find the problem that can
be discussed and explored whether we can help. If students encounter such difficulties, we
encourage them to contact the facilitator for support and assistance. All communications in
this regard will be treated as confidential and private.
Students can intimate their absence by sending an email to the course email address. In
case of prolonged absence (absence from class consecutively for two weeks), students seeking
compensation or consideration for missing assignments or participation should submit approval from the competent authority, duly forwarded by the Faculty Adviser. Such requests
will not be considered if submitted after two weeks of rejoining from the absence.
1.1
Menstruation Leave
In adherence to women’s health rights, students experiencing menstruation can avail themselves of menstruation leaves without the need to provide any specific reason for their absence.
If students miss assignments, participation, or evaluation components during menstruation,
they are encouraged to request alternative assignments or exercises without disclosing any
personal details. For further assistance, students are advised to contact Muskan Agrawal,
Associate Facilitator, at muskaanaggrawal@gmail.com Your privacy and well-being are
our utmost priority. The communications will be treated with confidentiality.
2
Differently-abled students
Special arrangements and necessary resources will be readily provided to support differentlyabled students. If you have any specific requirements, please do not hesitate to make a
request.
3
Diversity, Equity and Inclusion
The team firmly upholds egalitarian values, with a strong commitment to diversity and
inclusivity. We expect all participants to wholeheartedly appreciate and embrace this diversity. Throughout the course, we encourage the use of sensitive and inclusive language in all
discussions and written work.
We understand that students from different socio-economic, linguistic, and cultural backgrounds may encounter challenges during the course. As a supportive and caring learning
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community, we encourage students facing difficulties to reach out to the facilitator. We are
here to provide additional learning resources and assistance to help you overcome any hurdles.
4
Ethical and Honor Code
Active participation and shared learning are the foundation of education, especially in the
current course. Students need to be responsible for preparing for the session and participating in the discussions. While fostering a supportive learning environment, we expect
students to refrain aiding their fellow students in academic engagements without authorization or avoid assisting when such aid is perceived as unethical as per the institute’s norms.
Use of electronic devices (5.3) for non-academic purposes inside the classroom, use of AI
tools beyond permissible norms (5.2), plagiarism (5.1) are considered as grave breach of
honor code.
5
Academic Dishonesty
Academic dishonesty, as defined by the Institute and upheld by the top academic community, is strictly against the ethical code we cherish. Acts such as plagiarism (5.1), use of
AI tools (5.2) without declaration and beyond permissions, unauthorized aid or help, free
riding, and lack of preparation are unequivocally deemed as academic dishonesty. If any
member of a group observes a violation of these norms, it is their duty to promptly report
it to the facilitators.
5.1
Plagiarism
Plagiarism is not only a grave violation of academic integrity and honesty but also constitutes an offense. It is an act of presenting the work of others as your own. Such work may
include, but is not restricted to, ideas, words, figures, tables, and content in written or oral
forms. Students are expected to acknowledge or provide due references to the original source.
All assignments, including audio-video, programs, codes, and examinations submitted, are
expected to be the students’ own work. Plagiarism is a breach of trust between students
and their educators. Hence, as students, refraining from plagiarism is of utmost importance.
Students who engage in plagiarism may face disciplinary actions, ranging from receiving a
failing grade on the assignment or course.
5.2
Use of AI Tools
A limited use of generative Artificial intelligence (AI) is permitted. The limited use include
searching sources, understand key words, looking for facts or codes as suggestions among
others. The use of AI tools is not permissible for generating opinion articles, assignments,
exam answers or complete any other academic assignment which aims to develop critical
and independent thinking. However, students are responsible for any inaccurate, misleading, or entirely fabricated content, confidentiality breaches, data and privacy breaches, and
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any other violations of academic and non-academic honor codes and conduct. Additionally,
students are expected to ensure that the use of such tools does not breach the plagiarism
policy (5.1) or norms specified but not restricted in 4, and 5. Students must declare the use
of such tools for assignments, discussions, programs, or exams.
5.3
Use of Electronic Devices
The use of electronic devices is encouraged in class to support learning. Please be mindful
that they do not serve as a distraction to you or those around you.
5.4
Food
There are no restrictions on students to carry their food inside class adhering to the cleanliness policy of the institute.
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6
Evaluation Components and Grading Criteria
Component
Type
Class Participation
Individual
(6.1)
Assignments (6.2)
Mid-End Semester
Exams
6.1
Individual &
group
Individual
Weight
Remarks
30
Students will be awarded marks based on inclassroom participation and discussion. The
primary criterion for evaluation will be the
quality of the content. In-class exercises and
specific take-home assignments will also form
a part of this component.
60
It has two component. Case analysis and its
presentation/discussion.
10
These exams shall evaluate the analytical
ability and application of learning. The
structure of exams questions prioritize application over the memory-recall based or rote
learning.
Class Participation
This course mandates the active engagement and full participation of all students, encompassing both synchronous and asynchronous modes. Students are encouraged to provide
critical comments on the concepts, theories, corporate practices, current trends, market insights etc. Constructive contradiction and critical insights foster intellectual bent of mind
and ensure successful financial analyst. The students are highly encouraged to present their
views on valuation and do not hesitate to present different views than that of facilitator or
fellow participants.
Any questions about the meaning or definition of basic concepts expected from the previous
depth courses will prove that the student has not prepared for the class. Should students
encounter any difficulties, they are urged to reach out to the facilitator or associate facilitators
before the session. A specific set of questions from the pre-reads will be asked to select
students randomly for the sake of assessment. Class participation carries substantial weight
(6) in the grading process, reflecting the significance of collaborative learning and active
involvement.
Facilitators will closely monitor class participation as it significantly impacts the overall
grade (see ?? for details). However, it is essential to emphasize that participation should
not be solely driven by the desire for grades. Rather, it should reflect genuine engagement
and thoughtful contributions.
Participation goes beyond mere attendance; it entails thorough preparation for the class, focused attention during self-learning sessions, and developing unique thought process. Mean9 of 11
ingful engagement in discussions, raising thoughtful questions, expressing well-considered
views, and sharing new insights and suggestions are valuable aspects considered during evaluation. While valuation requires various and diverse views which are respected, it is crucial
to stress that the evaluation of class participation is primarily based on the quality and
content of the contributions. Speaking randomly or seeking attention through irrelevant
remarks is not conducive to a constructive learning environment. By encouraging substantive and thoughtful participation, we aim to foster a dynamic and intellectually stimulating
classroom atmosphere.
6.2
Assignments
Assignments
The case assignments need to be submitted by any group member. A case analysis assignment consists of a case analysis (doc/pdf), slides, and spreadsheet as applicable. The title
page of the document/ppt/spreadsheet should include the list of members with roll numbers.
Group formation guidelines
Students are free to form their groups for the group assignment. A group should consist of
at least two members and not more than four. In some instances, size of the group can be
relaxed on request. Such requests should be sent to the facilitator. Students are appealed to
include at least one student facing difficulty. Manels are not desirable. Women as a group
leader is highly encouraged. The diversity is incentivized with additional marks. Groups
are allowed to change members for each assignment. The facilitator retains the discretion to
add the student to the group. Due to the skewed ratio, manels are not ruled out.
Project
Project consists of valuation of a listed company by using the methods learned in the course.
Each student in the group shall choose a company to value in a particular industry/sector.
The group must ensure that at least one member chooses a negative earning firm, another
a firm with growth potential firm. The rest can choose a mature company or a company
of interest. The students are expected to complete application of each valuation method as
soon as it is discussed in the class (as per the schedule). After completion, each group is
expected to present the analysis and submit the valuation report with its recommendations.
The analysis grade is given to the group while presentation grade is given individually
A project completion certificate will be given to the students for inclusion in
resume or CDC purpose, on request. Nevertheless, it is issued only to the
students who obtain at least grade B especially in the project
Grading Criterion
Visiting Hours:
All general queries including seeking appointment can be sent to gshcourses@gmail.com
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Grade rule
EX
A
B
C
D
P
F
G-I
Above
90
80-90
70-80
60-70
50-60
35-50
<35
G-II
Average
Average
+
+1.8*SD
1.0*SD
Average
–
1.0*SD
35-50
<35
Average
Average
+0.5*SD
*If the performance of more than 65% of students is not according to Grade-I, the instructor may use the Grade – II method.
*
The students have to score a minimum of 25% in each component to pass the course;
and a minimum of 40% in each component to secure a top grade Ex/A. (Grade I and II).
*
The generic questions can be posted in the WhatsApp group. Any individual query other
than academic should only be sent to gshcourses@gmail.com or Group admin/Associate
Facilitator You may please send personal or emergency issues to the facilitator (gsshiremath@gmail.com).
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