Indian Institute of Management, Calcutta Post Graduate Programme 2015-2016

Course Name Corporate Restructuring Term PGP II, Term V Name of Course Coordinator Prof. Ashok Banerjee Name of the Instructor Prof. Ashok Banerjee

Objectives The objective of the course is to aware students about the various strategic ways to achieve superior corporate performance. Many Indian companies have adopted “maximising long-term ” as the central corporate objective. Enhancing long-term shareholder value involves managing costs, driving margins, managing , and inorganic growth through acquisitions and divestiture. The course would start with cost management issues- making students aware that cost consciousness is vital to sustain profitability. Then it would discuss several value creating strategies- creating shareholder value to unlocking shareholder value. Finally, we would study the linkage between employee performance and corporate objective- how employees can be motivated to act as owners. Session Plan: Session Learning Description objective 1 1 Shareholder Vs. Stakeholder Theory Agency theory and problem of free cash flows Excess capacity problems Essence of Corporate Restructuring Strategic Control Map Readings : a) Agency costs of Free Cash Flows, and b) Value maximizations, Stakeholder Theory & the corporate Objective c) Petroleum after the mega mergers d) Bank of America round table on Corporate Finance e) U.S. Corporate Governance: Accomplishments and Failings 2 4 Balance Sheet Restructuring: Asset Restructuring Modes of asset disposition Readings : Institutional Trading, information production, and the choice between spin offs, carve-outs, and tracking issues

3 Corporate restructuring Sustainable Growth and sustainable debt Leveraging assets to raise capital Readings : a) RBI guidelines on Corporate b) How Vishal Retail went off the shelf c) Exercises on Securitization 4 Corporate Debt restructuring: An exercise on Debt Restructuring

5 4 Balance Sheet Restructuring: Share buy back and corporate performance Indian experience Who gains & who loses in share repurchase program Stock splits –Information content Readings : a) Is a share buy back right for your company? b) Evidence on how companies choose between dividends and open market stock repurchases c) Share repurchases as a potential tool to mislead d) Note: Net Cash, Share Repurchase and EPS Growth (HBS 212101-PDF-ENG) Case : Autozone, Inc (UV-6463-PDF-ENG)

6 Basics of business Readings : a) : a primer b) An introduction to cash flow valuation methods ( HBS 9- 295-155) c) Principles of Valuation d) The valuation of closely-held companies in Latin America

7 Basics of business valuation Case: Valuation of Airthread Connections (4263-PDF-ENG) 8 4 Valuing synergy in M&A deals Readings: a) Can you run harder? Synergy b) Do you feel lucky? The acquisition Premium 9 4 Determination of swap ratio of M&A deals Factors behind structuring of purchase considerations Case: Monmouth, Inc. (4226) 10 Valuation: Justifying Premium Method of payment and firm performance Case: Gulf Oil Corp.- Takeover ( HBS 9-285-053) 11-12 2 Financing M&A Deal Structuring in M&A Risk Management in M&A Readings : a) Stock or cash? b) Technical Note on structuring and valuing incentive payments in M&A: Earnouts and other contingent payments to sellers (UV 0465, V2.5) c) What determines the financing decision in corporate takeovers: , agency problems, or the means of payment? Case: The MCI Takeover Battle: Verizon Vs. Qwest (HBS 9-206-045) 13 1 Risk Arbitrage in M&A Readings : a) A note on risk arbitrage (HBS 9-203-001) b) Price Pressure around Mergers 14 Regulatory Issues in M&A: How important is accounting issues in M&A? Readings: a) Accounting for ( HBS 9-101-021) b) Sweeping Changes in world wide M&A Accounting 15 Regulatory Issues in M&A: Taxation issues SEBI Takeover code- implications Takeover defense Readings : a) Takeover defenses b) SEBI regulations on Takeover 16 2 Corporate takeover battle: Indian experience Divestitures Readings : a) Sell –offs and Diversification b) Note on Sum-of-the-parts valuation (HBS 9-209-105) c) Restructuring through spinoffs Case: L&T 17 (EVA) and shareholder wealth EVA measurement Drivers of EVA Relationship between EVA and Market value Added (MVA). Readings : a) Linkage between economic value added and market value : an analysis b) EVA and divisional performance measurement : capturing synergies and other issues Case : The continuing Transformation of Asahi Glass : Implementing EVA ( HBS 9-205-030) 18-20 Project Presentations

Pedagogy The course would be conducted through lectures, case discussions, and illustrations. Reading materials would be provided in polycopy and hence there is no prescribed text. However, students may refer to journals (e.g. Mckinsey Quarterly, Harvard Business Review, Journal of Applied Corporate Finance, and Financial Management), CMIE’s monthly bulletin (Mergers and Acquisitions) and reference texts (mentioned above).

Evaluation Method Quiz 30% Class Participation 10% Project 20% End-term 40%