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2010/2011 KAN-OECON_OE32 Mergers and Acquisitions
| English Title | |
| Mergers and Acquisitions |
Course Information | |
| Language | English |
| Point | 7,5 ECTS (225 SAT) |
| Type | Elective |
| Level | Full Degree Master |
| Duration | One Semester |
| Course Period |
Autumn
Pending schedule: Week 36-48: 08.00-09.40, Friday Week 49: 08.00-11.30, Friday |
| Time Table | Please see course schedule at e-Campus |
| Max. participants | 50 |
| Study Board |
Study Board for MSc in Advanced Economics and Finance |
| Course Coordinator | |
| Peter Bogentoft - pb.eco@cbs.dkSecretary TBA | |
| Main Category of the Course | |
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Taught under Open University-Taught under open university. | |
| Last updated on 29 maj 2012 | |
| Learning Objectives | |||||
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The goal of the course is that the students after having successfully participated in the course are able to: • Describe and discuss different motives for M&As. • Describe and discuss the functioning of the market for corporate control in relation to takeovers. • Describe and discuss how macroeconomic conditions affect M&A activity. • Describe and discuss the problems of integrating the organizations involved in M&As. • Estimate efficiency gains from M&As using econometric techniques. • Solve formal contract theoretical models using tools from mathematical optimization, contract theory, and game theory. • Analyze questions related to M&As drawing upon one or more theories and to present this analysis in writing using a scientific and concise language. • Analyze formal models that are variations of the models and theories covered in the course and to provide economic intuition for the results obtained. The aim of the course is to provide an understanding of the role of mergers and acquisitions (M&As) for individual firms, industries, and entire economies. It draws on recent works in both industrial organization and corporate finance in order to give different perspectives on M&As. A number of topics will be covered during the course such as motives for M&As, the effects of M&As on productivity, the functioning of the market for corporate control, explanations for merger waves, and post-merger integration problems. Formal analysis of game-theoretic models is an integral part of the course. Therefore, knowledge of basic game theory and contract theory is expected. | |||||
| Prerequisite | |||||
| Students are expected to have some understanding of game and contract theory, industrial organization and corporate finance before the course. | |||||
| Examination | |||||
| Four hour written exam with all exam aids allowed. | |||||
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| Examination | |||||
| Prerequisites for Attending the Exam | |||||
| Course Content | |||||
The course will cover the following aspects of M&A: Theory of the firm and motives for integration I. Asset specificity and the hold-up problem II. Synergies and market power III. Financial synergies Estimating efficiency gains from M&As Hostile takeovers Macroeconomic conditions and M&A activity Post-M&A integration problems The market for corporate control and M&As | |||||
| Teaching Methods | |||||
| The course has a duration of 15 weeks and has one weekly lecture of 2 hours. In some weeks, the class activities will be extended to include student workshops, student presentations in class, and exercises. | |||||
| Literature | |||||
I. Asset specificity and the hold-up problem Grossman, S. and O. Hart, "The Costs and Benefits of Ownership: A Theory of Lateral and Vertical Integration," Journal of Political Economy, 1986, 94, 691-719. Hart, O. and J. Moore, "Property Rights and the Nature of the Firm," Journal of Political Economy, 1990, 98, 1119-1158. II. Synergies and market power Fridolfsson, S.-O. and J. Stennek, “Why mergers reduce profits and raise share prices—a theory of preemptive mergers,” Journal of the European Economic Association, 2005, 3, 1083–1104. Salant, S. W., S. Switzer, and R. J. Reynolds, “Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium,” Quarterly Journal of Economics, 1983, 98, 185-199. Perry, M. K and R. H. Porter, “Oligopoly and the Incentive for Horizontal Merger,” American Economic Review, 1985, 75, 219–227. III. Financial synergies Inderst, R. and H. Müller, “Internal versus External Financing: An Optimal Contracting Approach,” The Journal of Finance, 2003, LVIII, 1033-1062. Cestone, G. and C. Fumagalli, “The Strategic Impact of Resource Flexibility in Business Groups,” Leland, H., “Financial Synergies and the Optimal Scope of the Firm: Implications for Mergers, Spinoffs, and Structured Finance,” Journal of Finance, 2007, 62, 765-807. Estimating efficiency gains from M&As Bogetoft, P, and D.Wang, “Estimating the Potential Gains from Mergers,” Journal of Productivity Analysis, 2005, 23, 145-171 Bogetoft, P. and K.Katona, Efficiency Gains from Mergers in the Healthcare Sector, Research Paper 2008-1, NZA, The Netherlands, 2008, pp. 1-211, Part II. Bogetoft, P and T.E. Gammeltvedt, Mergers in Norwegian Elecricity Distribution: A Cost Saving Exercise, WP, 2006 Andrade, G., M. Mitchell, and E. Stafford, “New Evidence and Perspectives on Mergers,” Journal of Economics Perspectives, 2001, 15, 103-120. Hostile takeovers Tirole, J., The Theory of Corporate Finance, Ch. 11, 2006, Princeton University Press. Grossman, S. and O. Hart, “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation,” 1980, 11, Bell Journal of Economics, 42-64. Bulow, J., M. Huang and P. Klemperer, “Toeholds and Takeovers,” Journal of Political Economy, 1999,107, 427–454. Macroeconomic conditions and M&A activity Jovanovic, B. and P. L. Rousseau, “Mergers as Reallocation,” The Review of Economics and Statistics, 2008, 90, 765-776. Tirole, J., The Theory of Corporate Finance, Ch. 14, 2006, Princeton University Press. Post-M&A integration problems Meyer, Milgrom, and Roberts (1992): "Organizational Prospects, Influence Costs, and Ownership Changes," Journal of Economics and Management Strategy,1, 9-35. Carillo and Gromb (2006): “Cultural Inertia and Uniformity in Organizations”, Journal of Law, Economics, and Organization, 1-29. The market for corporate control and M&As Dodd, P. and J. Warner, “On Corporate Governance: A Study of Proxy Contests,” Journal of Financial Economics, 1985, 2, 401-438. Gompers, P. A., L. L. Ishii, and A. Metrick, “Corporate Governance and Equity Prices,” Quarterly Journal of Economics, 2003, 188, 107-155. Martynova, M. and L. Renneboog, The Performance of the European Market for Corporate Control: Evidence from the 5th Takeover Wave, Working Paper, The University of Sheffield Management School. | |||||