UNIVERSITY OF SOUTHERN CALIFORNIA MARSHALL SCHOOL OF BUSINESS

THE ENTREPRENEUR PROGRAM

BAEP 560: Entrepreneurship Acquiring an Existing Business Spring 2012 SYLLABUS Section #14414R Monday 6:30 p.m. to 9:30 p.m., JKP 102 3.0 Credit hours to be conducted in thirteen weekly sessions John D. Hussey Phone (424) 772-1178 or (213) 617-4112 Fax: (424) 772-1179 email: jhussey@sheppardmullin.com

OFFICE HOURS: PURPOSE:

Individual Appointments; call or email to schedule.

This course will focus on the issues faced by the entrepreneur who wishes to acquire an existing business and use it as a basis for his or her entrepreneurial journey. The entrepreneur needs to decide on the appropriateness of the business, understand funding sources and valuation methods, and develop a plan for due diligence, negotiating and consummating the transaction. The course will explore the acquisition process, approaches to valuation, and the roles of the various parties in negotiating and consummating an acquisition of an existing business. The course will also explore the issues involved in managing the transition of ownership and managing the business post-closing. This course is based on lectures, cases, selected readings and guest speakers. Course Project The course will have two projects. The first will evaluate a case study with respect to issues of concern in approaching an acquisition. The second will be a report that will evaluate a case situation and recommend the terms and conditions the student would propose for the acquisition. That evaluation should contain a description of the rationale for making an offer, planned sources of funding, and a description of anticipated acquisition and post-acquisition challenges. Each project may be done alone or on a team (up to three) basis. Deliver a hard copy of your work in class on the date the project is due or deliver an email copy prior to class if you must be absent on the project due date. Returned projects unclaimed by Students will be discarded four weeks following the end of the semester.

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This class is structured but will change if the faculty member discerns that students or conditions indicate the need to change. Student desires and backgrounds are considered. Your expectations are important! GUEST SPEAKERS: From time to time we will have guests. They will be prompt. We never wish to have late arrivals when we have guests. ACADEMIC STANDARDS: The University community consisting of faculty, students and administration is dedicated to high ethical standards. Every person at USC has an inherent responsibility to uphold the principles of academic integrity. Students are expected to understand the Academic Integrity guidelines in SCampus. CLASS PARTICIPATION: CLASS ATTENDANCE: The Entrepreneur Program is a real life experience and as such expects real world professionals. The motto is "treat each other as you would a customer." Therefore, tardiness and absences without prior notice and a valid excuse are not acceptable. Attending class is critical to learning. A class attendance form will be handed out at the beginning of each class which requires your personal-consistent-full-signature. Initialing the class attendance form is not acceptable. The signing of class attendance forms is necessary because of University policies and the need to have a record of class attendance as part of the evaluation process. Students are responsible for signing this form at the beginning of class. Any student who signs the name of another student on the class attendance form will receive an "F" for the course. In the event of a conflict between class participation and external (non-Marshall) events and activities that are subject to the MBA Program Policy Governing Non-Marshall conflicting events, a determination will be made by the Professor whether class attendance will be excused. PARTICIPATION: This is a lecture, case and reading materials based course. It is expected that each student will have prepared themselves on the material for the class meeting and will be prepared to discuss that material, drawing on their previous course work and experiences. Material for the class will be distributed on Blackboard in advance of each class or distributed in class. Participation is evaluated in a number of ways including evidence of preparation, willingness to participate, and quality of participation. The instructor and guest speakers may "cold call" students during the class to ascertain whether students have read assigned material and are prepared to discuss this material in class.

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NOTE: Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to me as early in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. 5:00 p.m., Monday through Friday. The phone number for DSP is (213) 740-0776.
Class Grading Class Project #1 Project #2 Class Participation Identification of Target Evaluation of an Assigned Case Opportunity And Terms of Acquisition 10% 30% 60%

Total

100%

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UNIVERSITY OF SOUTHERN CALIFORNIA MARSHALL SCHOOL OF BUSINESS THE ENTREPRENEUR PROGRAM CONFIDENTIALITY POLICY
Throughout the Entrepreneur Program's classes and events, students will be exposed to proprietary information from other students, guest lecturers and faculty. It is the policy of The Entrepreneur Program that all such information is to be treated as confidential. By enrolling in and taking part in The Entrepreneur Program's classes and activities, students agree not to disclose this information to any third parties without specific written permission from students, guest lecturers or faculty, as applicable. Students further agree not to utilize any such proprietary information for their own personal commercial advantage or for the commercial advantage of any third party. In addition, students agree that any legal or consulting advice provided without direct fee and in an academic setting will not be relied upon without the enlisted opinion of an outside attorney or consultant, without affiliation to The Entrepreneur Program. Any breach of this policy may subject a student to academic integrity proceedings as described in the University of Southern California University Governance Policies and Procedures as outlined in SCampus, and to the remedies that may be available at law. The Entrepreneur Program, the School of Business Administration and the University of Southern California disclaim any responsibility for the protection of intellectual property of students, guest lecturers or faculty who are involved in The Entrepreneur Program classes or events. Receipt of this policy and registration in our classes is evidence that you understand this policy and will abide by it.

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BAEP 560 (14414R):

Acquiring an Existing Business

Class Materials will be distributed via the class folder on Blackboard. TOPIC Week 1 Overview of the Course Approaches to Acquisition Decisions Reading: Case Study #1 Best Tools Co. January 23 DATE 2012 January 9

Week 2 Goals of Sellers and Buyers Reading: Acquiring or Selling the Privately Held Company Polk2010 An Introduction to Acquiring or Selling the Privately Held Company Brown Week 3 An Investment Banker's View The relationship between selecting targets and the availability of financing. Guest Speaker William K. Doyle, Managing Director of Kerlin Capital Group (Case Study) Assignment of Project 1 due February 27 Week 4 Structuring An Acquisition The relationship of tax issues to Buyer's and Seller's Goals. Protecting the Buyer against unknown liabilities. Reading: Federal Income Tax Issues in the Acquisition or Sale of a Privately Held Company James T. Chudy (PLI) Is a piece of the pie ever enough? Lefko

January 30

February 6

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TOPIC Week 5 Commencing and Negotiating Acquisition Process Approaching the Seller, Confidentiality Agreements, Letters of Intent, Definitive Agreements. Relationship of negotiating the purchase transaction and the financing transaction. Important issues other than price. Measures to close the price gap. Reading: Preliminary Agreements Clark Form of Confidentiality Agreement Form of Letter of Intent (Long Form) Form of Letter of Intent (Short Form) Structuring and Negotiating Earnouts Voxman Draft: Earnout Consideration

DATE 2012 February 13

Week 6 The Private Equity Firm and its relationship to the Entrepreneur in acquiring an existing business Guest Speaker J. Christopher Lewis, Riordan, Lewis & Haden Turn in Project 1 Week 7 Sources of Financing for Larger Transactions Guest Speaker Scott Kolbrenner, Houlihan Lokey Investment Banking Services Week 8 Smaller Transactions Finding Targets and Sources of Financing Guest Speaker Steve Brodhead, Business Broker, The M&A Group NA Assignment of Project 2. Week 9 Performing the Investigation Due Diligence Reading: Initial Due Diligence Checklist Model Form Performing Cultural Due Diligence Krattenmaker Intellectual Property Issues Why Its Called Due Diligence KMPG

February 27

March 5

March 19

March 26

Week 10 Experiences of the Entrepreneur in Acquiring a Business Guest Speaker Zackary Parker, President, Redline Detection, LLC

April 2

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TOPIC Week 11 Valuation of the Target How should the Buyer approach valuation. Guest Speaker Mark Higgins, Higgins Marcus & Lovett, Inc., Business Valuations Week 12 Planning for the Transition of Ownership and Operations Post-Acquisition. Turn in Project 2. Week 13 -- Review and Evaluation of Project No. 2 papers, wrap up.

DATE 2012 April 9

April 16

April 23

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