Course Title: FBE 460: MERGERS, ACQUISITIONS AND
RESTRUCTURING
Syllabus for Spring 2013
Professor: Lloyd Levitin
Office:
Acc. 301E
Office Phone: 310-740-6524
E-mail: levitin@marshall.usc.edu
TA: Alexander Berkenkamp (berkenka@usc.edu)
Lecture Class
Monday and Wednesday
4:00 – 5:50 P.M.
Office Hours
Thursdays
2:30 – 5:30 P.M.
Room: HOH 301
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.
 recognize the advantages and disadvantages of alternative deal structures.
 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.
 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.
 develop a concept, design a deal, and present a proposal for a merger and acquisition transaction.
 understand how value is created (or destroyed) as result of corporate mergers, acquisitions,
and restructuring transactions.
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Who Should Take This Course
Those who are seeking to become entrepreneurs, financial analysts, chief financial officers, operating
managers, investment bankers, business brokers, portfolio managers, investors, corporate development
managers, strategic planning managers, auditors, venture capitalists, business appraisers, consultants, or
who simply have an interest in the subject.
Prerequisite
GSBA 521 or GSBA 521b or GSBA 548.
Required Materials
 APPLIED MERGERS AND ACQUISITIONS (UNIVERSRITY EDITION) by R. Bruner
(Wiley, 2004) ISBN: 0471395056
Course Notes: Copies of lecture slides and other class information are available through your
Blackboard account.
Teaching Methods
This course is taught through a combination of readings, a group project and lectures. We begin each
session with a discussion of current events. You are encouraged to visit dealbook.nytimes.com before each
class to obtain a grasp of recent news.
About the Instructor
Lloyd Levitin is a Professor of Clinical Finance and Business Economics at Marshall. He was Executive
Vice President and CFO of Pacific Enterprises from 1982-1995 (now Sempra Energy), and was actively
involved in the firm’s diversification program which included numerous acquisitions. He testified as an
expert on utility diversification to the Senate Finance Committee of the U.S. Congress and has been a
consultant for JurEcon, Inc., a nationwide consulting and research firm for management and counsel. He
has a MBA from Wharton and a JD from University of San Francisco. He practiced as a CPA after
receiving his MBA, and as an attorney after receiving his JD.
Grading Summary:
Assignments
Points
% of Grade
25
35
25.0%
35.0%
M&A PITCH BOOK (group project)
25
25.0%
CLASS PARTICIPATION
5
5.0%
10
10.0%
100
100.0%
TESTS
Mid-Term
Final Exam
PEER EVALUATION ON GROUP PROJECT
TOTAL
Final grades represent how you perform in the class relative to other students. Your grade will not
be based on a mandated target, but on your performance. Three items are considered when
assigning final grades:
1. 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).
2. The overall average percentage score within the class.
3. Your ranking among all students in the class.
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Midterm and Final Exam (Midterm 25% of your grade; Final 35% of your grade)
The midterm and final exam will be closed-book, closed-notes. The final exam is cumulative from
the beginning of the course. Laptops or any hand-held device with email capabilities cannot be
used. You should bring a calculator to perform calculations.
M&A Pitch Book (25% of your grade)
This group project demonstrates your progress towards one of the key learning objectives of the
course: “Develop a concept, design a deal, and present a proposal for a merger and acquisition
transaction.” By the end of the third week of the semester, students will divide themselves into
“teams” of four-to-eight students each to play the role of a publicly-traded company seeking to
make an acquisition. Each team selects a real publicly-traded company it wants to represent,
identifies a potential target (also a real publicly-traded firm), and prepares a “Pitch Book,” the
purpose of which is to obtain CEO approval to commence negotiations. Key learning objectives
include (1) M&A strategy, (2) target company selection, (3) value creation in an M&A transaction,
(4) deal structuring, and (5) risk assessment and (6) ability to prepare a term sheet. This project
will count 25% of your grade, the ground rules and deliverables for this project are stated on pages
5 and 6 of this syllabus.
Peer Evaluation on M&A Pitch Book (10% of your grade)
Study groups provide a valuable learning experience – how to work effectively and efficiently in
groups (a common practice in Corporate America), learning from others, and sharpening a
student’s ability to communicate with others. However, human nature being what it is, some
students are tempted to relax and let others carry their load. In order to provide an incentive for all
students to make maximum contributions to the team project, students will be asked to grade each
team member’s contributions on a 10-point scale.
This evaluation is to be submitted by email to the Instructor before the last day of classes. 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 Participation (5% of your grade).
Attendance and participation are essential for success in this course. Students are expected to
actively participate in the class discussions. Class meetings will involve discussions of the assigned
readings and current events. Preparation for each class is essential.
In evaluating your class participation, I will consider the quality and frequency of your participation,
with a clear emphasis on quality. Students are required to display their name cards in each
class. I will have no other way to determine who is present and participating.
Academic Integrity
USC seeks to maintain an optimal learning environment. General principles of academic honesty
include the concept of respect for the intellectual property of others, the expectation that individual
work will be submitted unless otherwise allowed by an instructor, and the obligations both to
protect one’s own academic work from misuse by others as well as to avoid using another’s work
as one’s own. All students are expected to understand and abide by these principles. SCampus, the
Student Guidebook, (www.usc.edu/scampus or http://scampus.usc.edu) contains the University
Student Conduct Code (see University Governance, Section 11.00), while the recommended
sanctions are located in Appendix A.
Students will be referred to the Office of Student Judicial Affairs and Community Standards for
further review, should there be any suspicion of academic dishonesty. The Review process can be
found at: http://www.usc.edu/student-affairs/SJACS/ . Failure to adhere to the academic conduct
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standards set forth by these guidelines and our programs will not be tolerated by the USC Marshall
community and can lead to dismissal.
Student Disability
Any student requesting academic accommodations based on a disability is required to register with
Disability Services and Programs (DSP) each semester. A letter of verification for approved
accommodations can be obtained from DSP. Please be sure the letter is delivered to be as early in
the semester as possible. DSP is located in STU 301 and is open 8:30 AM to 5:00 PM, Monday
through Friday. The phone number for DSP is (213) 740-0776. For more information visit
www.usc.edu/disability.
Technology Policy
Laptop and Internet usage is not permitted during academic or professional sessions unless
otherwise stated by the professor. Use of other personal communication devices, such as cell
phones, is considered unprofessional and is not permitted during academic or professional sessions.
ANY e-devices (cell phones, PDAs, iPhones, Blackberries, other texting devices, laptops, iPods)
must be completely turned off during class time. Videotaping faculty lectures is not permitted, due
to copyright infringement regulations. Audiotaping may be permitted if approved by the professor.
Use of any recorded material is reserved exclusively for USC students registered in this class.
Classes Cancelled
Classed are cancelled for March 27 and April 1. Make-up classes will be scheduled in the
following week, which will be videotaped for those students unable to attend.
Add/Drop Process
If you are absent six or more times prior to September 14, (the last day to withdraw from a course
with a grade of “W”), I may ask you to withdraw from the class by that date. These policies
maintain professionalism and ensure a system that is fair to all students.
Retention of Graded Coursework
Final exams and all other graded work which affected the course grade will be retained for one year
after the end of the course if the graded work has not been returned to the student (i.e., if I returned
a graded paper to you, it is your responsibility to file it, not mine).
Emergency Preparedness/Course Continuity
In case of a declared emergency if travel to campus is not feasible, USC executive leadership will
announce an electronic way for instructors to teach students in their residence halls or homes using
a combination of Blackboard, teleconferencing, and other technologies.
Please activate your course in Blackboard with access to the course syllabus. Whether or not you
use Blackboard regularly, these preparations will be crucial in an emergency. USC's Blackboard
learning management system and support information is available at blackboard.usc.edu.
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COURSE READINGS/CLASS SESSIONS
Week 1
1/14
1/16
Week 2
1/21
1/23
Daily Activities
Tasks, Readings, and Due Dates
Introduction to M&A
Case Histories on M&A Failures
Bruner: Chapters 1 and 2
Bruner: Chapter 3: Pages 30-36; 54-56
HOLIDAY
M&A Strategies; M&A Alternatives
Bruner: Chapter 6: Pages 123-148.
Chapter 5
Week 3
1/28
1/30
Valuation
Valuation – continued
Bruner: Chapter 9: Pages 247-291
Bruner: Chapter 11
Week 4
2/4
Valuation – continued
Familiarize yourself with the S-4 filing
for Sears Holdings Corp. on 12/02/04.
The form will be posted in Blackboard.
Read carefully the opinions of the
financial advisor for Kmart and Sears
appearing on pages 52-67.
2/6
Initiating The Deal – Seller
Bruner: Chapter 31
Week 5
2/11
2/13
Initiating The Deal - Buyer
Acquisition Process For A Friendly Deal
Bruner: Chapter 7
Bruner: Chapters 8, 25, and 29
Week 6
2/18
2/20
Week 7
2/25
2/27
HOLIDAY
Deal Structuring – Transaction Types
Deal Structuring – Accounting
MIDTERM
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Bruner: Chapter 18
Week 8
3/4
3/6
Deal Structuring – Taxes
Deal Structuring – Financing
Bruner: Chapter 20
Week 9
3/11
3/13
Deal Structuring – Risk Reduction
Provisions
Deal Structuring – Social Issues
3/18-3/23
SPRING RECESS
Week 10
3/25
3/27
Week 11
4/1
4/3
Week 12
4/8
4/10
Week 13
4/15
4/17
Week 14
4/22
4/24
Week 15
4/29
5/1
5/8
Bruner: Chapter 24
Deal Structuring – Putting It All Together
Integration
Bruner: Chapter 36
Legal & Regulatory Environment – Board Bruner: Chapter 26
of Directors and Shareholder Voting
Legal & Regulatory Environment –
Bruner: Chapter 27
Securities Laws
Legal & Regulatory Environment Antitrust
Takeover Attack & Defense
Bruner: Chapter 28
Bruner: Chapter 33
Takeover Attack & Defense – continued
Restructuring
Restructuring - continued
Communication
Bruner: Chapter 6: pages 148-176
Pitch Book Due
Bruner: Chapter 35
Best Practices
REVIEW
FINAL EXAM 4:30-6:30 P.M.
Pitch Book Requirements
(Due in hard copy at beginning of class on April 23)
Objectives: This assignment addresses a goal of the course, to develop your ability to conceive and
design a proposed deal. It exercises the broad range of skills developed in this course.
Assignment:
 Form a team of 4-8 to work on the Pitch Book.
 Pick the acquiring firm. It must be publicly-traded.
 Choose the target. It must be publicly-traded or a division of a publicly-traded firm. It is
recommended that you pick a publicly-traded target firm with whom there might be some
solid strategic rationale to combine. Think seriously about the motives and economics of
combination, and try to offer a hypothetical marriage that makes business sense. Your
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strategic rationale for this deal should be summarized clearly in your presentation, and
should reflect careful thinking. You are free to choose any firm, though if you have a
choice, you should avoid unnecessarily complex combinations. To spark ideas, you might
consult lists of excellent firms and under performers.
By February 21, please send an email to me indicating the proposed buyer and target firm
in your proposed deal, and a brief discussion about why you will be recommending this
target. Discuss why your firm (the acquirer) needs to make an acquisition and why the
proposed target is a good fit. The proposed acquisition must be a purely hypothetical
transaction. If you send the email after February 21, you will receive a grade deduction.

Prepare the Pitch Book as if you were the VP of Corporate Development and the addressee
is your CEO. As of the date of your proposal, your idea has been held secret by your team,
unknown to the target firm. Your aim should be to convince the CEO to go forward with
the proposed transaction, committing time and capital to consummate the deal.

See pages 883-885 in the Bruner text for guidance in preparing a “Concept Proposal” to
senior management of the Buyer (i.e., referred to as the “Pitch Book”). In Exhibit 35.1 on
page 884, the contents of a hypothetical Pitch Book are set forth. It is highly
recommended that you follow the outline given in Exhibit 35.1
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