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Professor:
Prerequisites:
This is an MBA-level course that assumes students have had prior academic or professional exposure to
basic corporate finance principles and introductory accounting. Students should also be able to
proficiently use Microsoft Excel and be able to access/read .pdf documents.
Title: Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions
Authors: Joshua Rosenbaum and Joshua Pearl
Publisher: John Wiley & Sons
ISBN: 978-0-470-44220-3
Please note that his class will not utilize the models and templates that may be available
electronically with this text. However, students are encouraged to download the
materials for self-study and additional reference.
A few additional readings will be posted to the course website during the semester.
Class Format
This course will combine traditional lecture and case method teaching. Traditional lectures will largely
be used to teach technical valuation material and expose students to theoretical valuation frameworks.
Case method teaching will be used to assist students in applying the theoretical frameworks and
technical skills to real world situations. Please note that the class format has been updated from
previous semesters based, in part, on prior and helpful student feedback.
The Extension School is committed to providing an accessible academic community. The Disability
Services Office offers a variety of accommodations and services to students with documented
disabilities. Please visit www.extension.harvard.edu/resources-policies/resources/disability-servicesaccessibility for more information.
Grading:
Class Participation
Assignments
Mid-term
15%
25%
30%
Final
Total
30%
100%
Class Participation:
It is necessary and expected that students thoroughly read and analyze all readings before the start of
the class to which those readings are assigned. It is estimated that each two hour class will require 3- 4
hours of preparation. The course is based on the premise that active engagement in the issues both
before and during class is essential for deep learning and to the development of the capacity to use the
theory and techniques in uncertain, messy situations. Class time will be largely devoted to discussion of
the case studies, general conceptual issues raised in the cases and readings, and quantitative tools.
Students should attend class prepared to discuss the Discussion Questions for each class. If you are
unable to attend a class, please notify me ahead of time by email. If you anticipate being unable to
attend three or more classes during the semester, you should strongly consider not taking the course
until your schedule allows for full engagement. Active class participation is required thus all students
should have a stable internet connection and be able to verbally participate in class discussions.
Academic Honesty:
You are responsible for understanding Harvard Extension School policies on academic integrity
(www.extension.harvard.edu/resources-policies/student-conduct/academic-integrity) and how to use
sources responsibly. Not knowing the rules, misunderstanding the rules, running out of time, submitting
"the wrong draft", or being overwhelmed with multiple demands are not acceptable excuses. There are
no excuses for failure to uphold academic integrity. To support your learning about academic citation
rules, please visit the Harvard Extension School Tips to Avoid Plagiarism
(www.extension.harvard.edu/resources-policies/resources/tips-avoid-plagiarism), where you'll find links
to the Harvard Guide to Using Sources and two, free, online 15-minute tutorials to test your knowledge
of academic citation policy. The tutorials are anonymous open-learning tools.
Class 1: Sep 2
What is Value and How is it Measured?
Readings: Valuation: Measuring and Managing the Value of Companies (See course website.
You dont need to focus on the review questions at the end of this reading)
Companies with Benefits, The New Yorker, August 4, 2014 (see course website)
Understanding Financial Statements: Making More Authoritative Decisions
(5238BC) (Note: This is an introductory level reading that will be most helpful to
those with a weaker accounting background. For students with a strong
accounting backgrounds, this reading is optional)
Cases: Harman International and KKR (A) (UV4260)
Assignments: N/A
Discussion What is shareholder value and why is it important?
Questions: What are the competing priorities to shareholder value?
What are the primary sources of information to measure or assess the value
of a company (or an economic interest in that company)?
What are the advantages and limitations of each primary source?
Class 2: Sep 9
Introduction to Valuation Frameworks
Readings: Business Valuation: Standard Approaches and Applications (UV6586-PDF-ENG)
Students should begin reading Chapters 1 3 of Investment Banking. These
chapters will provide greater depth to the material presented in Business
Valuation: Standard Approaches and Applications
Cases: N/A
Assignments: N/A
Discussion What are the three principal valuation approaches?
Questions: What are the primary inputs to each approach?
What are the typical sources for these inputs?
What are the key underlying assumptions behind these approaches to value?
Describe circumstances in which one valuation approach may tend to be more
or less accurate than other approaches
Class 3: Sep 16
Financial Statements, Stock Price and Value
Readings: Tescos Accounting Problems: Not So Funny, The Economist (course website)
What Went Wrong at Tesco?, Financial Times (course website)
Cases: Bristol-Myers Squibb Company - Managing Shareholders Expectations (905B08)
Assignments: N/A
Discussion
Questions:
Class 4: Sep 23
Readings:
Cases:
Assignments:
Class 5: Sep 30
Readings:
Cases:
Assignment:
All assignments must be turned in to the drop box by Tuesday, September 30,
2014, 4:30 PM EST.
Discussion Please come to class prepared to discuss your solution to Assignment 1 and
Questions: critique that of your classmates:
Class 6: Oct 7
Application of Discounted Cash Flow and Net Present Value Analysis Part I
Readings: Students should have completed reading Chapters 1 - 3 of Investment Banking
Cases: Pacific Grove Spice (4366)
Assignment: Students should become familiar with the Pacific Grove Spice case. Pacific Grove
Spice will be the basis for discussion during this class and during future classes.
Students will be assigned the AirThread Connections NPV assignment (Class
Assignment 2) in class. The assignment will be posted to the course website. The
assignment should be completed using the Excel Valuation Template Model.
Discussion
How accurately does DCF measure value?
Questions:
Why might market value differ from a DCF-derived value?
Under what circumstances is DCF less likely to be accurate?
Class 7: Oct 14
Readings:
Cases:
Assignment:
Application of Discounted Cash Flow and Net Present Value Analysis Part II
Students should have completed reading Chapters 1 - 3 of Investment Banking
Valuation of AirThread Connections (4263)
Class Assignment 2:
Prior to the start of class, students will be required to hand-in the AirThread
Connections NPV assignment.
All assignments must be turned in to the drop box by Wednesday, October 14,
2014, 4:30 PM EST.
Discussion Please come to class prepared to discuss your solution to Assignment 2 and
Questions: critique that of your classmates
Class 8: Oct 21
Application of Market Multiples
Readings: Students should have completed reading Chapters 1 - 3 of Investment Banking
Pacific Grove Guideline Public Companies (will be posted to course website)
Cases: Review AirThread Connections
Review Pacific Grove Spice
Assignment: Students will be assigned the AirThread Connections Market Multiple assignment
(Class Assignment 3) in class. The assignment, along with supporting materials,
will be posted to the course website. The assignment should be completed using
the Excel Valuation Template Model.
Discussion
What characteristics of a company are most important when selecting
Questions:
guideline public companies?
How accurately do market multiples measure value?
When is a value based on market multiples likely to be less accurate?
Which valuation multiple(s) would you use to value Pacific Grove Spice?
Why?
Assume there were no publicly-traded companies that sold cooking spices,
how would you select guideline public companies?
Class 9: Oct 28
Readings:
Cases:
Assignment:
All assignments must be turned in to the drop box by Wednesday, October 28,
2014, 4:30 PM EST.
Discussion Please come to class prepared to discuss your solution to Assignment 3 and
Questions: critique that of your classmates
OPTIONAL: TBD
Long-Term versus Short-Term Shareholder Value
Readings: Air Products and Chemicals, Inc v. Airgas et al, Delaware Court of Chancery opinion,
February 15, 2011 (course website)
Letter from Larry Fink (Blackrock) to CEOs, March 31, 2015 (course website)
Focusing Capital on the Long Term, Harvard Business Review, Jan-Feb 2014
(coursepack)
Long-Term Effects of Hedge Fund Activism, L. Bebchuk, June 2015 (course website)
Cases: N/A
Discussion
Is there a difference between long-term and short-term value?
Questions:
Should the interests of long-term or short-term shareholders take
precedence?
From a valuation perspective, what do you think of the Chancery Court
opinion? Did the court get it right?