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FNCE 4830-800
Seminar in Investment Banking
Finance Division
Fall 2013, Wednesday, 3:30-6:15 PM
Instructors:
Office Hours:
Email:
Ronald W. Melicher
Koebel S405G
(303) 492-3182
T/W 2:00-3:00 p.m.
and by appointment
ronald.melicher@colorado.edu
Koelbel 308
Roberto Caccia
Koebel S326
(303) 492-4664
T/R 11:00 a.m.-12:30 p.m.
and by appointment
roberto.caccia@colorado.edu
Introduction:
Investment bankers advise issuers regarding the type and pricing of securities the issuer wishes
to sell. They also market and underwrite those issues, both initial public offerings (IPOs) and
seasoned issues. Investment bankers design hybrid instruments including convertibles, bonds
with warrants, and other exotic securities to meet a firm’s specific project financing need or to
appeal to particular investor desires or niches. In their advisory capacity, investment bankers
assist firms in: acquiring other firms, finding an acquirer, spinning-off or selling a specific
operating unit, and going private via leverage buyouts (LBOs) and management buyouts
(MBOs). This course introduces the student to a career in investment banking and provides
specific modeling skills necessary and important during the first phase of such a career.
Learning Objectives:
1) sophisticated financial planning using customized financial statements and Excel
programming
a. IPO phase financial planning
b. Restructure financial planning
c. Mergers and acquisitions financial planning
2) valuation skills including real-world estimations
a. Costs of capital
b. Discounted cash flow value
c. Relative (comparable) market value
3) basic financial engineering skills relating to
a. Customized financing
b. Tax implications and effects
c. SEC requirements and reasons
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Class Materials:
Required Textbook:
Joshua Rosenbaum and Joshua Pearl, Investment Banking, University Edition, Second
Edition (Wiley, 2013) [referred to as R&P].
Optional Textbooks (Available on Library Reserve):
J. Chris Leach and Ronald W. Melicher, Entrepreneurial Finance, Fourth Edition (Cengage
Learning, 2012) [referred to as L&M]. Selected chapters from this text can be used to
develop skill sets relating to financial statements forecasting, determining additional
financing needs, estimating the value of a firm using discounted cash flow (DCF) methods,
and developing a basic understanding of the relevant laws that govern the issuance of
securities. Individual chapters can be purchased through IChapters.com. We also keep
multiple free loaner copies available on a 1-week-at-a-time basis and there is a copy on
reserve in the library.
Aswath Damodaran, Damodaran on Valuation, Second Edition, (New York: John Wiley &
Sons, 2006) [DOV]. This text serves as an important reference text for determining the cost
of financial capital, further understanding of the use of discounted cash flow (DCF)
approaches to value firms, determining firm values using relative valuation methods (e.g.,
revenue and earnings multiples), and valuing non-equity securities. There is a copy on
reserve in the library.
Case Packet:
A collection of investment banking-related Harvard Business School and Darden Business
School cases is available at the CU Campus Bookstore.
Reference Textbooks:
Jonathan Berk and Peter DeMarzo, Corporate Finance: The Core, Second Edition
(Prentice-Hall, 2011).
Richard A. Brealey, Stewart C. Myers and Franklin Allen, Principles of Corporate
Finance, Tenth Edition (McGraw- Hill/Irwin, 2011).
Stephen Ross, Randolph Westerfield, and Jeffrey Jaffe, Corporate Finance, Ninth Edition,
Irwin McGraw-Hill/Irwin, 2010).
Eugene F. Brigham and Michael C. Ehrhardt, Financial Management, Thirteenth Edition
(Dryden Press, 2011).
Robert C. Higgins, Analysis for Financial Management, Ninth Edition (McGraw-Hill
Irwin, 2009).
General Readings:
Michael Lewis, Liar’s Poker (Penguin Books, 1990) and The Big Short: Inside the
Doomsday Machine (Thorndike Press, 2011)
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John Rolfe and Peter Troob, Monkey Business (Warner Books, 2001).
Peter L. Bernstein, Capital Ideas (Wiley, 2005 reprint), Capital Ideas Evolving, (Wiley,
2007) and Against the Gods (Wiley, 1998).
Procedures and Expectations:
Classroom attendance and participation is expected and required. Students are expected to
display their name card at each classroom session. Class participation in case discussions (both
voluntary and involuntary through cold calls) is important to the class take-away. The classroom
behavior policy and University policies regarding academic and behavior issues can be reviewed
at: http://www.colorado.edu/policies/index.
"If you qualify for accommodations because of a disability, please submit to me a letter from
Disability Services in a timely manner so that your needs may be addressed. Disability Services
determines accommodations based on documented disabilities. Contact: 303-492-8671, Willard
322, and http://www.Colorado.EDU/disabilityservices".
"Campus policy regarding religious observances requires that faculty make every effort to
reasonably and fairly deal with all students who, because of religious obligations, have conflicts
with scheduled exams, assignments or required attendance. See full details at
http://www.colorado.edu/policies/fac_relig.html". Please advise us in advance of any conflicts
with the course schedule and your religious observance. We will be happy to work with you on
alternatives that do not interfere with your religious obligations.
"All students of the University of Colorado at Boulder are responsible for knowing and adhering
to the academic integrity policy of this institution. Violations of this policy may include:
cheating, plagiarism, aid of academic dishonesty, fabrication, lying, bribery, and threatening
behavior. All incidents of academic misconduct shall be reported to the Honor Code Council
(honor@colorado.edu; 303-725-2273). Students who are found to be in violation of the academic
integrity policy will be subject to both academic sanctions from the faculty member and nonacademic sanctions (including but not limited to university probation, suspension, or expulsion).
Other information on the Honor Code can be found at
http://www.colorado.edu/policies/honor.html and at
http://www.colorado.edu/academics/honorcode/ ".
Assignments:
Students will self-select into teams. A signup sheet will be provided. Each group will be
responsible for submitting two major case write-ups and presenting one of the two majors. Each
group will also be responsible for two minor case write-ups. Additionally, each group will
develop and prepare analysis and presentation materials to support a “pitch” to a corporate client
preparing for an initial public offering. The corporate client will be designated during the latter
part of the course. These presentations will be rehearsed and professional with multimedia
content. The pertinent background information for the client pitch will be provided during the
course. This part of the course is a competition and therefore groups are cautioned regarding too
much sharing of approach and presentation strategy.
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While you may freely reference outside sources including other groups of students, each write-up
must be a group’s own product and no portion can be copied or extracted from existing or other
groups’ write-ups.
Major written case analyses (excluding the final IPO Pitch Book Plus project) should follow
distributed guidelines and consist of a written analysis of approximately four (4) pages plus up to
four (4) pages of figures, tables, and/or spreadsheet output. The oral presentation of a case
should be 20-25 minutes. Two minor case write-ups are required on two of the remaining three
cases. Minor write-ups should be in the form of a one page executive summary and one page of
exhibits or analysis.
Grading:
The grading weights used to determine a course grade are:
Case Analysis, Write-ups and In-Class Presentations
Written and Oral Presentation of the Client-Pitch Book Plus IPO Project
Individual Class Participation
40%
40%
20%
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Tentative Course Outline:
Date
Topics
R&P, L&M, and DOV Textbooks;
Cases, Problems, & Misc.
Course Logistics, Objectives, & Goals
General Readings; DOV Ch 1
Week 1
Aug. 28
Investment Banking Overview
Week 2
Sep. 4
Financial Analysis Review
L&M Ch 5; Corp. Fin. Textbooks
Methods to Improve Financial Performance
Salzburg Tech. Problems
Introduction to L-T Financial Planning
L&M Ch 6; Corp. Fin. Textbooks
Financial Statement Projections & Financing
Needs
Minoso Corp. Problems
Week 3
Sep. 11
Guest speaker: Lee Slonimsky (Ocean Capital Partners)
Week 4
Sep. 18
Projecting Financial Statements & Operations
Implications
Case: The Body Shop International
I-Banking Jobs and Interviews
(Luke Duster & Nathan Hukill)
Week 5
Sep. 25
New York I-Banking Trip (“Wall Street Trek”)
No class
Financial Planning & Valuation Implications
Case: California Pizza Kitchen
Comparable Companies Analysis
R&P Chs 1 & 2; DOV Chs 7, 8, & 9
Global Corp. Problem
Cost of Capital Basics
L&M Ch 7; DOV Ch 2; R&P Ch 3
Weighted Ave. Cost of Capital Discount Rates
Norton Mfg. Corp.
Target Capital Structure and the Cost of Capital
Case: Wm. Wrigley Jr. Company
Discounted Cash Flow Valuation Basics
R&P Ch 3; DOV Chs 3 & 4; L&M Chs
9 & 13
Week 6
Oct. 2
Week 7
Oct. 9
Week 8
Oct. 16
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Week 9
Oct. 23
DCF Enterprise Valuation Method
Datametrix Corp. Problem
Burridge Conference Speaker(s) TBD
Week 10
Oct. 30
DCF Enterprise & Comparable Firms Valuations Case: Eskimo Pie
Introduction to Derivatives
Week 11
Nov. 6
Valuing an Acquisition Target
Case: Interco
Risk Management
Week 12
Nov. 13
Leveraged Buyout Basics
LBO—Derivatives Solution
R&P Chs 4 & 5
Read case, prepare for class discussion
Guest Speaker: Rob Kaufman
Week 13
Nov. 20
Mergers & Acquisitions Synergies
R&P Chs 6 & 7; DOV Chs 13 & 15
Wok Yow Corp. Problems
IPO Pitch Book Preparation
Group meetings with instructors
Fall Break / Thanksgiving Holiday
No class
IPO Pitch Book Plus Presentations
Evaluation: IBanking Panelists
& course professors
Week 14
Nov. 27
Week 15
Dec. 4
Week 16
Dec. 11
Course Summary & Wrap-up