ED-MScCORP-S2-FIN-MFM MERGERS & ACQUISITIONS AND FINANCIAL DISTRESS &

RETRUCTURING
NUMBER OF HOURS: 30
SEMESTER 2
INTERNATIONAL PROGRAMME 4 ECTS
COURSE COORDINATOR: Vincent GRIMALDI DE PUGET and PwC

COURSE OBJECTIVES
The objective of Part I "Mergers & Acquisitions" (19 hours) is twofold.
- The primary objective of Part I is for each student to achieve proficiency regarding the
key strategic, financial, financing issues of M&A as well as to be able to customize an
M&A process to a specific situation;
- The secondary objective is (1) to apply finance and accounting principles from previous
coursework, (2) to gain proficiency in company valuation.
The objective of Part II " Financial Distress and Restructuring" (11 hours) is for students to
become familiar with the causes and relevant indicators of business distress, and
different ways for distressed companies to restore performance and value. The main
causes for financial distress, i.e. liquidity issues, over-leverage or operational profit issues,
will be discussed, as well as the key features of deleveraging management and workout
solutions.

LEARNING OUTCOMES
Participants completing this course should be able to:
1. Understand key M&A concepts, e.g., as presented by an M&A specialist;
2. Perform a Multiple-based and DCF-based valuation, and understand the main
issues of Financing;
3. Build a basic LBO model with various scenarios, compute IRRs and cash-on-cash
ratio;
4. Develop critical thinking on how and when to use M&A as a corporate strategy
tool, and how to deal with investment bankers;
5. Understand the typical causes of financial distress, and how to prevent those
situations;
6. Master the key indicators of business trouble, and the basics of crisis
management;
7. Understand the workout process on the specifics of the jurisdiction at hand

COURSE CONTENT

Part I: Mergers & Acquisitions, by Vincent GRIMADI DE

PUGET
Class 1 (3 hours): Lecture on M&A Basics
Content:
1.
2.
3.
4.
5.

What is M&A? What is Investment Banking?

Why does M&A and professional career path matter to you?
Why do companies and Private Equity firms do M&A transactions?
Sell-side and buy-side processes (from pitch to closing)
Life as an M&A banker

Required reading:
- League tables / on current M&A activity - to be posted by the
professor on BlackBoard
- Damodaran, 3d Edition
CHAPTER 1 Introduction to Valuation
CHAPTER 2 Approaches to Valuation
CHAPTER 3 Understanding Financial Statements

Class 2 (3 hours): Lecture on DCF Valuation

Content:
1. Introduction to Valuation
2. Market Valuation of Publicly Traded Companies
3. Fundamentals of Value Creation
4. Understanding Financial Statements
5. Measuring Risk
6. Discount Rate and Cost of Capital
7. DCF Valuation
8. Estimating a Terminal Value
Required readings:
Damodaran, 3d Edition
CHAPTER 4 The Basics of Risk
CHAPTER 11 Estimating Growth
CHAPTER 12 Closure in Valuation: Estimating Terminal Value

Class 3 (3 hours): Case study - Acquisition

Content:
1. Class Discussion about the Case Study
2. The Truth about M&A
3. Internal vs. External Growth
4. Introduction to the Team Project
Required readings:
Damodaran, 3d Edition
CHAPTER 13 Dividend Discount Models
CHAPTER 14 Free Cash Flow to Equity Discount Models
CHAPTER 15 Firm Valuation: Cost of Capital and Adjusted Present
Value Approaches
Required preparation:
Case preparation: Four M&A Cases (Harvard)

Class 4 (3 hours): Lecture on Relative Valuation and LBO

Model
Content:
1. Fundamentals of Relative Valuation
2. Transaction and Traded Comparables
3. The Case of Aston Martin
4. DCF vs. Relative Valuations
5. Introduction to LBO
6. LBO and Cost of Capital
7. Financial Modeling Example: XLS Valuation Exercise
8. Value Enhancement: The Reality behind the Numbers
Required readings:
Damodaran, 3d Edition
CHAPTER 17 Fundamental Principles of Relative Valuation
CHAPTER 18 Earnings Multiples
CHAPTER 20 Revenue Multiples and Sector-Specific Multiples
Required preparation:
Valuation Exercise on XLS (to be announced on
BlackBoard)

Class 5 (3 hours): Case study M&A Case

Content:
1. Class Discussion about the Case Study
2. Valuation of Startups
3. Valuation of Service Businesses
4. Valuation of Bankrupt Businesses
5. Format of Next Lesson: Team Presentations
Required readings:
Damodaran, 3d Edition
CHAPTER 23 Valuing Young or Start-Up Firms
CHAPTER 24 Valuing Private Firms
CHAPTER 25 Acquisitions and Takeovers
Required preparation:
Case preparation: Yahoo (Harvard)

Class 6 (4 hours): Conclusions and Team Presentations

Content:
1. Team Project Presentations
2. Negotiating the Deal to Closing
3. Conclusions on M&A
Required preparation:
Prepare the Team exercise, send it to the professor
(see below) and be ready to present your conclusions as a
team or individually -- in front of the classroom
Q&A: 30 minutes might be set aside to answer final questions on M&A

Part II: Bankruptcy and Restructuring, with PwC

-

Causes of business troubles, and key indicators

Financial restructuring & Operational turnaround"
Crisis management

TEACHING & LEARNING METHODS

For Part I:
The teaching will be based on a mix of
- In-class lectures and case studies
- Homework case studies
- Interactive participation of students in the classroom
Student assignments include performing the following before the class:

Mastering the required readings in the Course Text book (Brealey-Myers-Allen,

Principles of Corporate Finance, 10th edition) or the Valuation Manual
Preparing Case Studies and Class Discussions in writing, so that you have the
necessary supporting material to argue your case. However, those written notes
do not have to be turned in to the professor.
Staying abreast of current affairs impacting M&A, through authoritative sources:
WSJ, FT, The Economist, Les Echos, La Tribune, etc.
Being prepared to discuss potential additional questions and/or problems that may
be posted to Blackboard throughout the semester, so it is your responsibility to
frequently check BlackBoard.

Team Project: Student will execute a Team Project, which will reflect an M&A presentation
to a Board of Directors. The topic will be the acquisition of targeted companies with
rationales to transact, targets' SWOT analysis, valuation, and relative merits of one target
over the others. You can think of yourselves as an M&A boutique, or an internal Corporate
Development and Strategy Team.
What should your team deliver?
3

Short Powerpoint Report (Emailed to the professor BEFORE the last class; a
specific date will be announced)
Team Presentation, with your Powerpoint (your team will be informed 48 hours
before whether they are called upon to make a presentation, which is realistic in
real life). It will be followed with a Q&A from the audience.

Teams of six (6) are to be formed during the first week of class, and each team should
select a team leader. The team leader is to email to the professor the names of all the
team members by the end of the first week.
It is the student responsibility to join a team and any student needing help should
immediately contact Alexandra MATRICON before the end of the first week. Thank you.
The detailed requirements the Team Project will be set forth later on
BlackBoard.
For Part II:
The content will be presented by professionals of the restructuring markets process corporate restructuring advisors, transition managers, and turnaround specialists on the
investment side to illustrate all the above aspects using a case study.
Students can bring their computers to classes if it helps them review their calculations
and improve their quantitative skills. However, please avoid surfing the web. Thank you.

ASSESSMENT METHODS
Part I: 30% Team Project (details below in procedural matters)
70% Final exam
Part II 100% Final exam (closed-books)

RECOMMENDED READING
Reference Textbook: Damodaran, Investment Valuation, 3rd Edition (or earlier)
In Damodaran, you should feel free to skip the paragraphs/sections related to stocks and
trading, which are interesting but not directly relevant for this course. Visit also the
author's website at www.damodaran.com.
Further readings to get acquainted with the investment banking culture in the US include:
The Predators Ball
Barbarians at the Gate
Monkey Business
Liar's Poker

RESEARCH MATERIALS
Library information and the Web provide useful resources. Suggested resources are:
1.
2.
3.
4.

EDHEC online Library

Damodoran website
Yahoo Finance or Google Finance
The websites of investment banks and M&A boutiques