UCL School of Management

Module Fact Sheet

MSIN0028: Mergers & Valuation

Taught by
Level
Advanced
Prerequisites
Some prior accounting, economics or general business studies may be helpful
Eligibility
3rd, 4th year undergraduates from all departments
Terms
Term 2
Delivery method
2-hour lecture (x 10 weeks) and 1-hour workshop (x 9 weeks)
Assessment
75% final unseen 2-hour examination; 25% coursework
Previous Module Code
MSIN3004

Course overview

“Value” represents one of the most visible terms and concepts in business today. But with that extensive visibility also comes errant interpretations and outright errors in analysis.

This course, “M&V” is directed at providing students with insights into today’s leading analyses and techniques in the related areas of company valuation and merger valuation.

The first refers to the defensible worth of the firm as based upon the most reliable and respected methodologies. The second represents the answer to the question, ‘Was this merger a success?’. Long subject to the whimsy of the observer, modern M&A valuation today is primarily oriented to the issue of returns for the acquiring firms continuing shareholders in relation to alternatives (cost of capital) and achievable synergies (post-close improvements).

Learning outcomes

Upon successful completion of the module, students will:

  • Have a practical understanding of the three different historical approaches to company valuation, along with an appreciation of the strengths and weaknesses of each

  • Understand issues and analyses associated with both parts of the Two Stage Discounted Cash Flow (DCF/2S) approach, the consensus leading approach today in both company and merger valuation

  • Differences in apparent ‘price’ versus ‘value’, especially as relating to Initial Public Offering (pricing)

  • Comprehend both the use and misuse of: multiples in company and merger analysis, reliance on ‘financial restructuring’ as a primary postmerger technique

  • Comprehend the four major merger valuation methods and the strengths and weaknesses of each

  • Appreciate the importance of systematic examination of synergies in M&A analysis, guided by a four category methodological and implementation framework

Topics covered

  • ‘Seven Keys to Merger Success’

  • Cash flow measures displace EPS in company valuation

  • Continuous Growth Formulation

  • Terminal value issues

  • Break-up analysis: value-creating or destroying?

  • Private equity (PE) merger perspectives, measures

  • Merger ‘success’ for buyer, seller, intermediary

  • Why Most Mergers Fail (and what to do about it!)

  • ‘Merger segmentation’

Assessment summary

75% is awarded on the basis of the result of an unseen 2-hour examination paper in the Summer Term. 25% is awarded on the basis of a coursework paper (topic to be assigned).

Current students should refer to Moodle for specific details of the current year’s assessment.

Essential reading

Clark, Peter J. and Mills, Roger M. (2013). Masterminding the Deal: Breakthroughs in M&A Strategy and Analysis, Kogan Page, ISBN 978-0-749469528; Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 3rd Ed., University Ed., Wiley, ISBN 978-1-118011522

Past versions of this module

MSIN3004 17/18

MSIN3004 16/17

Last updated Tuesday, 14 August 2018