Faculty
Professor Sydney Finkelstein
Objectives
Mergers and acquisitions are among the most dynamic, and difficult, strategic activities firms can undertake. Mergers and acquisitions have been a major part of global business for a long time, and can be viewed from many different perspectives. In this course, the perspective taken is a strategic one, with a focus on how mergers and acquisitions can be used as a strategic tool by managers. In other words, this is not a finance course and it is not a valuation course; it is a strategy course.
M&As have been part of the business landscape for centuries. In modern times, companies have come to rely on M&As for a major part of their growth. In fact, it is a virtual certainty that mergers and acquisitions will continue to be a major driver of corporate strategy for thousands of companies around the world. Why? Because there is simply no quicker way to grow a business than to acquire another one. Given the ubiquity of M&A activity in the economy in general, and as a central component of strategy in particular, the purpose of this course is to make sure you understand what works, and what doesn’t, in the world of mergers and acquisitions.
Being ready means gaining a deep knowledge of M&As, both conceptually and practically. When you’re done with this course, you should be able to rely on a framework on how to assess potential M&A candidates, and be able to use a wide set of practical ideas on how to link M&A strategy to competitive strategy, manage due diligence, think about M&A negotiation, and integrate an acquisition. We will use both best practice and worst practice examples extensively.
This course will be of special interest to students planning careers in consulting and strategic planning. However, because most managers will be involved in acquisition activity at some point in their careers (either as an acquiring company or a target), students expecting to hold jobs in general management will find this course helpful as well. Finally, although this course examines mergers and acquisitions from a strategic perspective, and not an investment banking/finance perspective, the issues we address will be of relevance to students planning careers in finance as well.
Requirements
Class Preparation
The course packet contains the readings and cases. Although a variety of pedagogical methods will be used, such as lectures, case discussion, in-class exercises, and guest speakers, classroom time will predominately revolve around the cases and associated readings. Thus, the essential requirement for this course is a thorough preparation and analysis of the assigned case and reading material, and active participation in the classroom.
Grading
Grading for the course will be based on class participation, including various presentation assignments listed in the course outline below. Hard copies of presentations will comprise part of this grade. Final grades will be constrained by Tuck’s grade distribution policy as shown in your Student Handbook.
Materials
Tuck Honor Code
All students are expected to read each case fully and prepare their own individual analyses of the whole case. However, once this individual analysis has been completed, students should feel free to work together in groups to help sharpen points of view and refine analyses. Group discussions in advance of class are an excellent way to prepare for class.
Where presentations are based on group work, by allowing your name to be included on the cover page you are indicating that you fully participated in the work of the group.
Class participation will be evaluated by the instructor after every session. Students who miss class for any non-emergency reason will not receive any credit for participation on that day. No compensatory work will be accepted.
Grading
Schedule
Session 1
Tuesday: February 3, 2009
The M&A Challenge
Mergers and acquisitions are among the most difficult of all strategic initiatives a company can engage in. We know this because of the dismal track record of M&As, but we don’t really understand it yet. In this first class we see some of the problems first-hand when we review two short and well-known M&A cases. The essential challenge of the entire course is laid out, and we begin to build the groundwork for a careful exploration of what it takes to make M&As work.
Case:
Quaker Oats and Snapple (Tuck)
Sony Pictures Entertainment (Tuck)
Readings:
Bekier, M., A. Bogardus and T. Oldham (2001). “Why Mergers Fail.” McKinsey Quarterly 4: 6-9.
Bower, J. (2001 March). “Not All M&A's Are Alike - and That Matters.” Harvard Business Review 79(3): 92.
Davidoff, S. M. (2008). “The Deal Professor’s Year-End Review.” New York Times, December 29, 2008. http://dealbook.blogs.nytimes.com/2008/12/29/the-deal-professors-year-end-review/
Baghai, M., S. Smit, and S. Viguerie (2008). “M&A Strategies in a Down Market.” McKinsey Quarterly August: 1-3.
Could the acquisition of Snapple by Quaker Oats have been a success? If so, what could have been done differently?
Why did Sony acquire Columbia Pictures? How strong was the logic for this deal? Why did it go wrong?
Looking at both of these acquisitions together, what are the key challenges in making M&As work?
Session 2
Monday: February 9, 2009
A Venture Capital Perspective on M&A
Session 3
Tuesday: February 10, 2009
Best Practice in M&A
Session 4
Monday: February 16, 2009
Value Creation and Corporate Strategy
Cooper made over sixty acquisitions in a twenty year period to grow from a small manufacturer of compressors to a Fortune 50 manufacturer of a wide range of products. Yet Cooper remained an operating company run by a small team of corporate executives. How were they able to bring off this corporate strategy and what are its limits?
Case:
Cooper Industries' Corporate Strategy (HBS #9-391-095)
Goold, M. and A. Campbell (1998 Sep/Oct). “Desperately Seeking Synergy.” Harvard Business Review 76(5): 130-143.
What is Cooper's corporate strategy, and is it successful?
Should Cooper continue to diversify in the future?
Should it acquire Champion Spark Plug?
What are the limits to Cooper's corporate strategy?
Note: The Cooper Industries case is long and detailed in many places. A description of the company, its history of acquisitions, and much of its strategy, is covered in the first ten pages of the case. Then, on pages 10-16, critical issues on the role of the corporate office in making Cooper's acquisition strategy work are discussed. This section describes the role of finance, administration, and manufacturing services. To help ensure that we do justice to this latter section, I would like students to individually prepare a short presentation (3-5 minutes) on one of these three areas. The presentation should answer the following questions: (1) How does this area create value for Cooper?, and (2) What are your recommendations for improvement in this area? I will select one or two students in each area to make an informal presentation in class.
Please prepare (brief) typewritten notes to be used as the basis for a presentation if selected, and to be handed in at the end of class. I will then select 3 additional students to compile a summary of the key points contained in these notes, which will then be copied and distributed to the entire class. In this way, everyone will have a good set of class notes on a complex issue.
If your last name begins with A-G, prepare your presentation on the role of finance.
If your last name begins with H-O, prepare your presentation on the role of administration.
If your last name begins with P-Z, prepare your presentation on the role of
manufacturing services.
Session 5
Tuesday: February 17, 2009
Mergers and Acquisitions in Financial Services
Session 6
Monday: February 23, 2009
How to Develop an M&A Capability in High-Tech Industries
The high-tech sector has been one of the most dynamic in the economy over the last ten years. Competition here is based more on speed, talent, and innovation than in most other industry sectors. Do mergers and acquisitions make sense in this environment? Is there anything unique about high-tech that affects the fundamentals of M&A strategy? What are the special challenges of M&A integration in high-tech? How do firms in this industry develop a capability in making M&As work? These are the issues we explore through analysis of Cisco's M&A strategy.
Case:
Cisco Systems, Inc (Tuck)
Porter, M. (1987 May/June). "From Competitive Advantage to Corporate Strategy." Harvard Business Review 65(3): 43.
Buckman, R. "Pick of the Crop." Wall Street Journal, June 1, 2006
Answer the study questions at the end of the case.
Session 7
Tuesday: February 24, 2009
The Strategic Logic for M&As
In today’s class we will have a lecture/discussion on merger and acquisition strategy. At this point of the course it should be clear that acquisitions can destroy value as often as they create value. I will develop a framework, based on the notion of parenting advantage, which provides guidance on whether a prospective deal is a good one to make strategically.
Campbell, A., M. Goold, and M. Alexander. (1995). “Corporate strategy: The quest for parenting advantage”, Harvard Business Review, 95(2): 120-132.
Session 8
Monday: March 2, 2009
Analyzing Recent M&As
Case:
Student Choice.
There have been many major acquisitions announced in the last 12 months. In this class, student groups will make presentations on any one of the acquisitons they wish to study. Presentations should focus on one deal, and after describing the basic facts, should address the following issues at a minimum:
Why was the acquisition made? Why did the acquirer choose acquisition versus some other form of growth? Why did the target agree to be acquired? Why is this acquisition interesting to study?
Does the acquirer have a parenting advantage? Does the deal pass the two tests of parenting advantage? What are the sources of parenting advantage, if any? What is the potential value creation and/or value destruction in this deal?
What has been done thus far in integrating the acquisition, and does it make sense to you? If the acquisition is still very new, what would you focus on for the integration, and why? What are the major pitfalls to expect in this particular acquisition integration?
Is this acquisition likely to enhance the acquirer’s competitive advantage? How? Is this advantage sustainable? Overall, what is your assessment of this acquisition?
Session 9
Tuesday: March 3, 2009
The Keys to M&A Success
Special Time for Both Sections: 3:00 – 4:30
