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2011/2012  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
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
  • Søren Bo Nielsen - Department of Economics
Course responsible: Søren Bo Nielsen sbn.eco@cbs.dk Secretary: Rikke Glahn rg.eco@cbs.dk
Main Category of the Course
  • Finance
  • Organization
  • Corporate and Business Strategy
  • Economics, macro economics and managerial economics

Taught under Open University-Taught under open university.
Last updated on 29 maj 2012
Learning Objectives
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.
Students are expected to have some understanding of game and contract theory, industrial organization and corporate finance before the course.  
Four hour written exam with all exam aids allowed.
Written exam:
Assessment Written Exam
Marking Scale 7-step scale
Censorship No censorship
Exam Period Winter Term
Aids Open Book, Written Aid is permitted
Duration 4 Hours
Course Content

The course will cover the following aspects of M&A:

Theory of the firm and motives for integration

I. Synergies and market power

II. Agency problems

III. Financial synergies
IIII. Asset specificity and hold-up

Estimating efficiency gains from M&As

Hostile takeovers

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.

Andrade G., M. Mitchell and E. Stafford, ”New Evidence and Perspectives on Mergers”, Journal of Economic Perspectives, 2001, 15, 103-120.
Bogetoft, P.Restructuring, Ch 8 in Performance Benchmarking, Springer, 2011 (to appear).
Bogetoft, P. and D. Wang, “Estimating the Potential Gains from Mergers”, Journal of Productivity Analysis, 2005, 23, 145-171.
Barros, P.P. and L. Cabral: “Merger Policy in Open Economies”, European Economic Review, 1994, 38, 1041-1055.
Cremér, J., ”Arm’s length relationships”,Quarterly Journal of Economcis, 1995, 110, 275-295.
Dodd, P. and J. Warner, “On Corporate Governance: A Study of Proxy Contests,” Journal of Financial Economics, 1985, 2, 401-438.
Farrell, J. and C. Shapiro, “Horizontal Mergers; An Equilibrium Analysis”, American Economic Review, 1990, 107-126.
Gompers, P. A., L. L. Ishii, and A. Metrick, “Corporate Governance and Equity Prices,” Quarterly Journal of Economics, 2003, 188, 107-155.
Grossman, S. and O. Hart, “A Theory of Vertical and Lateral 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.
Haufler, A. and S.B. Nielsen, “Merger Policy to Promote ‘Global Players’? A Simple Model”, Oxford Economic Papers, 2008, 60, 517-545.
Holmström, B. and J. Roberts, “The Boundaries of the Firm Revisited”, Journal of Economic Perspectives, 1998, 12, 73-94.
Inderst, R. and H. Müller, “Internal versus External Financing: An Optimal Contracting Approach”, Journal of Finance, 2003, 58, 1033-1062.
Martynova, M. and L.D.R. Renneboog, “The Performance of the European Market for Corporate Control: Evidence from the 5th Takeover Wave,” European Financial Management, 2011, 17, 208-260.
Perry, M.K. and R.H. Porter, “Oligopoly and the Incentive for Horizontal Merger”, American Economic Review, 1985, 75, 219-227.
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, 93, 185-199.
Tirole, J., The Theory of Corporate Finance, Princeton University Press, 2006 (ch. 1, section 1.5, and ch. 11).