UT Dallas Syllabus For Aim6346.001 06f Taught by Suresh Radhakrishnan (Sradhakr)

Page 1 of 14 AIM6346: Mergers & Acquisitions
Course Syllabus
Course Information
Course Number/Section AIM 6346 501
Course Title Financial Dimensions of Mergers and Acquisitions
Term Fall 2006

Days & Times Tuesdays 4:00 PM to 6:45PM
Professor Contact Information

Professor Suresh Radhakrishnan
Office Phone 972-883-4438
Other Phone
Email Address sradhakr@utdallas.edu
Office Location SM4.426
Office Hours Tuesdays 3:00PM to 4:00PM
Other Information
Course Pre-requisites, Co-requisites, and/or Other Restrictions

AIM 6201
Course Description
The course objective is to improve your ability to (a) apply financial statement based information
to identify suitable target companies, (b) understand how the accounting rules affects the
performance measures after merger/acquisition, and (c) valuing targets and the link to synergy.
Topics will include: basic and accounting-information based valuation models, financial traits of
target companies, accounting rules and value of synergy. Legal and regulatory issues such as
anti-trust, F.C.C. clearance, tax issues will not be covered.
Student Learning Objectives/Outcomes

1. To apply analytical techniques of ratio analysis and valuation in M&A decisions
2. To learn to work in groups
3. To learn to negotiate in a defensible fashion with suitable analytical tools
Required Textbooks and Materials

Required Texts
Required Materials
• Lecture notes and cases will be made available on WEBCT. The School Policy dictates that
hardcopies not be distributed. It is your responsibility to ensure that you have the lecture
notes and case materials that are to be discussed in class.
Suggested Course Materials

Suggested Readings/Texts
• Mergers & Acquisitions: A Valuation Handbook, by Joseph H. Marren, McGraw-Hill, 1993 [or
any Corporate Finance Text]
• Advanced Accounting, by Hoyle, Schaefer, Doupnik, McGraw-Hill, 1999 [or any other
Advanced Accounting Text]
Suggested Materials
Professor Suresh Radhakrishnan 1

Assignments & Academic Calendar

Topics, Reading Assignments, Due Dates, Exam Dates
SEE ATTACHMENT A
Grading Policy
The deliverables for the course includes (a) three individual homework assignments
[SEE ATTACHMENT B FOR DETAILS] and (b) two group assignments – the deal making game
[SEE ATTCHMENT C FOR DETAILS] and the final project [SEE ATTCHMENT D FOR
DETAILS]. It is your responsibility to ensure that homework is turned in on or before the
due dates. If for any reason you cannot make it to class on the due date (because of your
work/travel plans), please make sure that the homework is emailed to me before class on
the due date. No credit will be given for late submissions.
For the group assignments, you are expected to work in small groups. Only one copy of
the report needs to be turned in, for each group. At the end of the course you will be asked to
evaluate the contribution of each of the individuals in the group. Each group will make a
presentation of Final Project to the class that will be evaluated by yours friends/colleagues in the
class. A copy of the peer evaluation forms is provided at the end of the outline. [SEE
ATTACHMENT E FOR THE DIMESIONS OF EVALUATION.]
The relative weights for the deliverables are:
Individual homework 20%
Deal-making game report 20%
Final Project write-up 30%
Final Project presentation (peer evaluation) 10%
Group contribution (peer evaluation) 20%
The target grade distribution is
A 50%
B 40%
C or lower 10%
NOTE: Please give me e-mails by the first week of class. I will provide a deadline for you to form
groups.
Professor Suresh Radhakrishnan 2

Course Policies
Make-up exams
NOT APPLICABLE
Extra Credit
There is no policy for extra credit
Late Work
Late work will be given a grade of zero
Special Assignments
SEE ATTACHMENT B FOR THE DEAL MAKING GAME AND FINAL PROJECT
Class Attendance
Class attendance will not be awarded grades
Classroom Citizenship
Normal and decent etiquettes apply. During any discussions please ensure that you respect your
colleagues.
Field Trip Policies / Off-Campus Instruction and Course Activities
Student Conduct & Discipline
The University of Texas System and The University of Texas at Dallas have rules and regulations
for the orderly and efficient conduct of their business. It is the responsibility of each student and
each student organization to be knowledgeable about the rules and regulations which govern
student conduct and activities. General information on student conduct and discipline is contained
in the UTD publication, A to Z Guide, which is provided to all registered students each academic
year.
The University of Texas at Dallas administers student discipline within the procedures of
recognized and established due process. Procedures are defined and described in the Rules and
Regulations, Board of Regents, The University of Texas System, Part 1, Chapter VI, Section 3, and
in Title V, Rules on Student Services and Activities of the university’s Handbook of Operating
Procedures. Copies of these rules and regulations are available to students in the Office of the
Dean of Students, where staff members are available to assist students in interpreting the rules and
regulations (SU 1.602, 972/883-6391).
A student at the university neither loses the rights nor escapes the responsibilities of citizenship.
He or she is expected to obey federal, state, and local laws as well as the Regents’ Rules,
university regulations, and administrative rules. Students are subject to discipline for violating the
standards of conduct whether such conduct takes place on or off campus, or whether civil or
criminal penalties are also imposed for such conduct.
Academic Integrity
The faculty expects from its students a high level of responsibility and academic honesty. Because
the value of an academic degree depends upon the absolute integrity of the work done by the
student for that degree, it is imperative that a student demonstrate a high standard of individual
honor in his or her scholastic work.
Course Syllabus Page 3

Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to
applications for enrollment or the award of a degree, and/or the submission as one’s own work or
material that is not one’s own. As a general rule, scholastic dishonesty involves one of the
following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students
suspected of academic dishonesty are subject to disciplinary proceedings.
Plagiarism, especially from the web, from portions of papers for other classes, and from any other
source is unacceptable and will be dealt with under the university’s policy on plagiarism (see
general catalog for details). This course will use the resources of turnitin.com, which searches the
web for possible plagiarism and is over 90% effective.
Email Use
The University of Texas at Dallas recognizes the value and efficiency of communication between
faculty/staff and students through electronic mail. At the same time, email raises some issues
concerning security and the identity of each individual in an email exchange. The university
encourages all official student email correspondence be sent only to a student’s U.T. Dallas email
address and that faculty and staff consider email from students official only if it originates from a
UTD student account. This allows the university to maintain a high degree of confidence in the
identity of all individual corresponding and the security of the transmitted information. UTD
furnishes each student with a free email account that is to be used in all communication with
university personnel. The Department of Information Resources at U.T. Dallas provides a method
for students to have their U.T. Dallas mail forwarded to other accounts.
Withdrawal from Class
The administration of this institution has set deadlines for withdrawal of any college-level courses.
These dates and times are published in that semester's course catalog. Administration procedures
must be followed. It is the student's responsibility to handle withdrawal requirements from any
class. In other words, I cannot drop or withdraw any student. You must do the proper paperwork
to ensure that you will not receive a final grade of "F" in a course if you choose not to attend the
class once you are enrolled.
Student Grievance Procedures
Procedures for student grievances are found in Title V, Rules on Student Services and Activities,
of the university’s Handbook of Operating Procedures.
In attempting to resolve any student grievance regarding grades, evaluations, or other fulfillments
of academic responsibility, it is the obligation of the student first to make a serious effort to
resolve the matter with the instructor, supervisor, administrator, or committee with whom the
grievance originates (hereafter called “the respondent”). Individual faculty members retain
primary responsibility for assigning grades and evaluations. If the matter cannot be resolved at
that level, the grievance must be submitted in writing to the respondent with a copy of the
respondent’s School Dean. If the matter is not resolved by the written response provided by the
respondent, the student may submit a written appeal to the School Dean. If the grievance is not
resolved by the School Dean’s decision, the student may make a written appeal to the Dean of
Graduate or Undergraduate Education, and the deal will appoint and convene an Academic
Appeals Panel. The decision of the Academic Appeals Panel is final. The results of the academic
appeals process will be distributed to all involved parties.
Copies of these rules and regulations are available to students in the Office of the Dean of
Students, where staff members are available to assist students in interpreting the rules and
regulations.

Incomplete Grade Policy
As per university policy, incomplete grades will be granted only for work unavoidably missed at
the semester’s end and only if 70% of the course work has been completed. An incomplete grade
must be resolved within eight (8) weeks from the first day of the subsequent long semester. If the
required work to complete the course and to remove the incomplete grade is not submitted by the
specified deadline, the incomplete grade is changed automatically to a grade of F.
Disability Services
The goal of Disability Services is to provide students with disabilities educational opportunities
equal to those of their non-disabled peers. Disability Services is located in room 1.610 in the
Student Union. Office hours are Monday and Thursday, 8:30 a.m. to 6:30 p.m.; Tuesday and
Wednesday, 8:30 a.m. to 7:30 p.m.; and Friday, 8:30 a.m. to 5:30 p.m.
The contact information for the Office of Disability Services is:

The University of Texas at Dallas, SU 22
PO Box 830688
Richardson, Texas 75083-0688
(972) 883-2098 (voice or TTY)
Essentially, the law requires that colleges and universities make those reasonable adjustments
necessary to eliminate discrimination on the basis of disability. For example, it may be necessary
to remove classroom prohibitions against tape recorders or animals (in the case of dog guides) for
students who are blind. Occasionally an assignment requirement may be substituted (for example,
a research paper versus an oral presentation for a student who is hearing impaired). Classes
enrolled students with mobility impairments may have to be rescheduled in accessible facilities.
The college or university may need to provide special services such as registration, note-taking, or
mobility assistance.
It is the student’s responsibility to notify his or her professors of the need for such an
accommodation. Disability Services provides students with letters to present to faculty members
to verify that the student has a disability and needs accommodations. Individuals requiring special
accommodation should contact the professor after class or during office hours.
Religious Holy Days
The University of Texas at Dallas will excuse a student from class or other required activities for
the travel to and observance of a religious holy day for a religion whose places of worship are
exempt from property tax under Section 11.20, Tax Code, Texas Code Annotated.
The student is encouraged to notify the instructor or activity sponsor as soon as possible regarding
the absence, preferably in advance of the assignment. The student, so excused, will be allowed to
take the exam or complete the assignment within a reasonable time after the absence: a period
equal to the length of the absence, up to a maximum of one week. A student who notifies the
instructor and completes any missed exam or assignment may not be penalized for the absence. A
student who fails to complete the exam or assignment within the prescribed period may receive a
failing grade for that exam or assignment.
If a student or an instructor disagrees about the nature of the absence [i.e., for the purpose of
observing a religious holy day] or if there is similar disagreement about whether the student has
been given a reasonable time to complete any missed assignments or examinations, either the
student or the instructor may request a ruling from the chief executive officer of the institution, or
his or her designee. The chief executive officer or designee must take into account the legislative

intent of TEC 51.911(b), and the student and instructor will abide by the decision of the chief
executive officer or designee.
Off-Campus Instruction and Course Activities
Off-campus, out-of-state, and foreign instruction and activities are subject to state law and
University policies and procedures regarding travel and risk-related activities. Information
regarding these rules and regulations may be found at the website address given below.
Additional information is available from the office of the school dean.
(http://www.utdallas.edu/Business Affairs/Travel_Risk_Activities.htm)
These descriptions and timelines are subject to change at the discretion of the Professor.

ATTACHMENT A: Tentative Course Outline

Topic
Date Recommended reading/ Filename
assignments
8/22 ¾ Introduction • Chapters 1, 2; Appendix D, E • CW: “LN 1A Introduction.pdf”
¾ M&A process “LN 1B Mergerstat_July2001.pdf”
“BusinessWeek_Oct2002.pdf”
8/22 & 8/29 ¾ Ratio analyses • CW: Lecture note 2 • CW: “LN 2 Ratio Analyses.pdf”
¾ Target evaluation • CW: “Ratio_AOL_NTSC_case.pdf”,
“Netscape_financials.xls”
• HW 1:“HP_SUN.pdf” and “HP_SUN.xls”
Course outline page 9
9/5 & 9/12 ¾ Inter-corporate investments – • CW: Lecture note 3A, 3B • CW: “LN 3A Accounting for Acquisitions-
Overview and Fair value method Overview.pdf"
• CW: “LN 3B Accounting for Acquisitions-
Fair Value Method.pdf"
9/12 ¾ Inter-corporate investments – • CW: Lecture note 3C • CW: “LN 3C Accounting for Acquisitions-
Equity method • DUE: HW 1 HP, SUN Equity Method.pdf"
9/19 ¾ Inter-corporate investments – • CW: Lecture note 3D • CW: “LN 3D Accounting for Acquisitions-
Acquisitions Consolidation (New).pdf"
¾ In – process R&D • HW 2: “HW2 Accounting for Acquisitions.pdf”
9/19 ¾ Asset write downs • CW: AOL Time Warner • CW: “AOL Asset Writedown Case
FootNotes.pdf”; “AOL Asset Writedown
Solution.xls”
• HW 3: “Nortel Asset Writedown Case
FootNotes.pdf”; “Nortel Case.xls”
9/26 ¾ Incentive issues • CW: ATT & NCR case • CW: “ATTNCRcase.pdf”,
“ATTNCRsolution.pdf”,
“ATTNCR_solution.xls”

ATTACHMENT A (CONTINUED): Tentative Course Outline

Topic
Date Recommended reading/ assignments Filename
9/26 ¾ Choice of acquisition method, • CW: Lecture note 3E • CW: “LN 3E Accounting for Acquisitions-
premium – research findings • CW: Lecture note 3F Consolidation (Old).pdf"
¾ Special topics • CW: Lecture note 3G • CW: “LN 3F Accounting for Acquisitions-
• DUE: HW 2 Goodwill and IPRD Choice of method.pdf"
• CW: “LN 3G Accounting for Acquisitions-
Special topics.pdf"
10/3 ¾ Proforma financials • CW: Lecture note 4 • CW: “LN 4A Basics of Valuation-
¾ Valuation • CW: Chapter 22, 23, 24 Appendix A FCFE_FCFF.pdf”
• DUE: HW 3 Nortel • CW:” LN 4B Basics of Valuation -
Accounting.pdf”
• CW: “LN 4 Proforma.pdf"
10/3, 10/10 ¾ Valuation • CW: RHC case • CW: “RHCcase.pdf” “RHCsolution.pdf”
& 10/17 • CW: Chapter 22, 23, 24 Appendix A “RHCsolution.xls”
10/24 ¾ Synergy and value • CW: Lecture note 6 • CW: “LN 6 Synergy_and_Value"
“E6.1 synergy_operating_RSCorp.xls”
“E6.2 ATT_NCR operating synerge.xls”
“E6.3
Lube&Dalton_financial_synergies.xls”
10/31 ¾ Real Options • CW: Appendix B • CW: “LN 7 Real options.pdf" “E7.1
¾ Earnouts and Incentives Real_options_egs_xls”
• CW: “LN 8 Earnouts.pdf”
10/31 ¾ AOL, Netscape – Valuation, • CW: AOL, Netscape case • CW: “LN 5A AOL & Netscape valuation.pdf"
performance • CW: Chapter 22, 23, 24 Appendix A • CW: “LN 5B AOL & Netscape
performance.pdf"
11/7 ¾ Catch-up, Project Preparation •
time
11/14 ¾ Deal making game • Pharmaceutical Industry • Course outline page 10
“Deal_Making_Case_Anonymous1.pdf”
11/21 ¾ Project presentations • DUE: Presentations • Course outline page 11
¾ Project report due • DUE: Report
¾ Deal making game report due • DUE: Deal-making game report

ATTACHMENT B: INDIVIDUAL HOMEWORK
Homework 1 [Individual]
Case: HP & SUN
Due Date 9/12
[6 points]
Refer to the AOL financials that have been provided to you [Reference “HW1 HP_SUN.xls” and
“HP_SUN.doc”]
Case: Accounting for Acquisitions
Due Date 9/26
[7 points]
Refer to the case and answer the questions. [Reference “HW2 Accounting for acquisitions.doc”]
Case: Nortel Asset Write down
Due Date 10/3
[7 points]
Refer to the cases and answer the questions. [Reference “Nortel Assets Writedown Case
Footnotes.doc” and “Nortel Case.xls”]

ATTACHMENT C: Deal-making game [Group]
Case:Pharmaceutical Industry
Game Date: 11/14
Report Due Date: 11/21
[20 points]
I will assign each group to either represent BigCo Inc. (acquirer) or SmallCo Inc. (target).
Read up the case material. Compute ratios, proforma financials for the target, value the target
before class on 11/14. You will need to do this whether you are BigCo or SmallCo. You will
meet for about 2 hours on 11/14, to negotiate a deal with the counterpart group. The analysis
should be geared with the perspective of striking a deal. There could be offers and counter
offers.
On 11/21 provide a write-up for why you agreed upon the price, your justification (assumptions)
and valuation. Your write-up should contain the description of your strategy and models before
you went into the negotiation. It should then include what happened during the negotiations.
The best offer will get 5 additional points. Remember to bid-low and ask-high. The BigCo group
that has the lowest deal value and the SmallCo group that has the highest deal value will each
get a bonus of 5 points. To mitigate collusion concerns the SmallCo group that agrees for the
lowest price will get minus 4; and the BigCo group that agrees to the highest price will get minus
4. These bonus points will be awarded only if the deviation from the mean deal value is
sufficiently high, and is based on the instructor’s discretion and judgement.
Advice: Look at the fundamentals and arrive at the valuation that you deem appropriate. Don’t
try to find out the exact real life deal! The bonus points are not geared towards closeness to the
real life deal.
The written-report should be about 5 pages. Present the bid-ask rounds in a Table, showing
how you had converged on a price during negotiations. Indicate how you arrived at a starting
point for your bids/asks. Indicate what strategy you had chosen for negotiation and whether and
how you changed your strategy. What surprises, if any, did you encounter in the negotiation?

ATTACHMENT D: Final Project (Group)
Analyzing a Merger
Report due date: 11/21
Presentation date: 11/21
Objective: The objective of this project is to analyze a historical merger.

State the objectives of the analysis. What do you want to learn from the analysis? Do
you want to analyze whether the acquirer overpaid for the target? Do you want to examine the
synergy expectations? Do you want to examine the performance of the merger?
For each of these objectives you will have to choose the appropriate questions which will
help achieve an understanding of the objective. Some representative questions are presented
below.
What were the growth/ synergy expectations?
Does the bid-premium look appropriate?
Was the value paid appropriate?
What accounting method was used?
Are there any discernable incentive effects?
What was the performance based on accounting reports before and after
the merger?
Are there any other accounting issues, such as in-process R&D,
restructuring charge, etc.?
What were the determinants of the merger?
What were the events that lead to the merger?
What news items appeared, along with the stock price reactions, before
and after the merger?
Were there any problems with integration of operations?
Were there any news items/reports on the problems associated with the
merger/ integration?
The questions and focus above are just illustrative. Please try and refrain from
demonstrating your ability to apply all the tools that you learnt over the course. The
project strives to take you to the next step, i.e., using the right tools for an objective.
Suggested Approach:
¾ Choose a merger or acquisition of firms that were traded in the stock market.
¾ Construct a time line of events leading to the merger/acquisition and understand the merger.
¾ Obtain at least four annual/quarterly reports for each of the firms, before the announcement
of the merger. That is, you are going to behave as if, you had the same information set as
was available to the acquirers and the target. Also, obtain four annual reports after the
merger.
¾ Read the financial statements and the MD&A to gain an understanding of the management’s
perception of growth/performance and strategy.
¾ Perform a ratio analysis to provide you with a better feel for the economic environment
¾ Value the firms using the theoretical approaches along with a sensitivity analysis.
¾ Based on the actual deal price, what do you think was the expectation of the acquirer? Is the
expectation reasonable?
¾ What accounting method was chosen? Analyze the financials and performance after the
merger. Are there any concerns and questions?
Source:
¾ Annual reports: You may find the SEC’s database of company filings useful [the internet site
is http://www.freeedgar.com/. Use 10-Ks (the annual reports) for a company. You may order
the annual report from the company directly, or find copies of the annual report on the
company’s home page. Please do not go to databases such as the COMPUSTAT,
VALUELINE etc., to get this data, because adjustments are already made to some items.

¾ For press releases you may go to the company’s homepage or lexis-nexis at UTD library.
¾ Betas can be obtained from various internet sources – such as, yahoo finance.
Note that the above is a list of suggested sources. You will need to show some enterprise in obtaining
data. Please document the source and provide a copy of the annual report (the relevant sections and
footnotes) in the appendix with the final report.
Write-up: The main report should be about 10-15 pages [typewritten, 1.5 or double-spaced].
Provide an executive summary, which should contain the main points you learnt from the
analysis. The body report should provide (a) a short background and outlook for the company –
as far as it is relevant (please avoid the temptation to reproduce paragraphs from the MD&A !),
(b) the reasons why the firms merged as stated by the management (c) how and why do your
analyses support these reasons, (d) does the performance after the merger reflect the
expectations, and (e) finally, what have you learnt from the analysis. financials, ratios, proforma
financials, detailed assumptions, valuation and sensitivity analysis can be appendices. Your
detailed number crunching exercises, such as ratio analysis, valuation, assumptions, forecasts,
data source, etc., can be put in Appendices. Integrate the main aspects of the number
crunching, in summary tables or charts, in the main body of the report.
Clarity of final report will be rewarded.

ATTACHMENT E: PEER EVALUATION
Evaluation of Individual Contribution to Group
GROUP #:
NAME OF EVALUATOR:
NOTE: Please do not evaluate yourself !
Dimensions of evaluation
A. Distribution of work
B. Helpful in explaining difficult topics
C. Helpful with ideas, questions and discussion
D. Quality and timeliness of work performance
E. Leadership and overall collegiality
A
NAME OF GROUP B C D E Total
MEMBER (0-4) (0-4) (0-4) (0-4) (0-4) (0-20)
Each dimension is to be evaluated on a scale of 0-4 with 0 the minimum and 4 the maximum.
For example, if you perceive that you did more work, and the rest was distributed evenly across
other group members, you might want to give a 2 to all the group members.

ATTACHMENT E: PEER EVALUATION (CONTINUED)
Evaluation of Presentations
GROUP #:
NAME OF EVALUATOR:
NOTE: Please do not evaluate yourself !

Dimensions of evaluation:
A. Content – Complete, coherent, clear, concise and correct
B. Delivery – Poised, powerful, persuasive, polished, prepared
Gr
Date A. Content B. Delivery Total
# Company Time [0-7] [0-3] [0 – 10]
10
11
The contents is to be evaluated on a scale of 0-7 with 0 the minimum and 7 the maximum; while
the delivery is to be evaluated on a scale of 0-3 with 0 the minimum and 3 the maximum.

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Page 1 of 14 AIM6346: Mergers & Acquisitions

Term Fall 2006

Professor Contact Information

Course Pre-requisites, Co-requisites, and/or Other Restrictions

Student Learning Objectives/Outcomes

Required Textbooks and Materials

Suggested Course Materials

Professor Suresh Radhakrishnan 1

Assignments & Academic Calendar

Professor Suresh Radhakrishnan 2

Field Trip Policies / Off-Campus Instruction and Course Activities

Student Conduct & Discipline

Course Syllabus Page 3

Withdrawal from Class

Student Grievance Procedures

Course Syllabus Page 4

Incomplete Grade Policy

The contact information for the Office of Disability Services is:

Religious Holy Days

Course Syllabus Page 5

Off-Campus Instruction and Course Activities

Course Syllabus Page 6

ATTACHMENT A: Tentative Course Outline

Course Syllabus Page 7

ATTACHMENT A (CONTINUED): Tentative Course Outline

Course Syllabus Page 8

Course Syllabus Page 9

Course Syllabus Page 10

Objective: The objective of this project is to analyze a historical merger.

Course Syllabus Page 11

Clarity of final report will be rewarded.

Course Syllabus Page 12

NOTE: Please do not evaluate yourself !

Course Syllabus Page 13

NOTE: Please do not evaluate yourself !

Course Syllabus Page 14

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