To identify interesting behavioral aspects in one M&A deal

1. Choice of Your Individual Projects: Major Mergers and Acquisitions Announced after January 2021 (Please do not pick old deals)

We have provided many largest M&A deals on the course website. Since two students cannot work on one deal, the deal will be offered on a first-come-first-served basis. Therefore, please shortlist a few deals that you want to work on and check the course website if these deals have already been taken by others. Don’t worry: we have close to 3000 recent big deals (deal size larger than 1 Billion USD) and we have less than 30 registered students in this class. (To be fair to everyone, please do not choose the UBS-Credit Suisse deal that we discussed in class)

Also, you can choose your own deal, especially those from your home countries.

Check the course website frequently and find out deals that have been taken by your classmates. Send 5 untaken deals (in the order of your preference) to the TA. The TA will assign one case to you. You can only work on a deal if and only if you receive the confirmation email from the TA.

There area few tips for case selection:

a) it is usually easier to find information for larger deals (look at the deal value!) involving public firms;

b) but larger deals are not necessarily always more interesting;

c) it is a good idea topin down the behavioral aspects (see the template below) that you want to talk about first, before you make the move;

- The best way to identify behavioral aspects is to find a puzzle in a deal that you cannot address by rational explanations.

d) once you receive the confirmation from the TA, start working on it right away; a common mistake is that some students wait until the last week before the deadline; remember, you also have your group project presentation and report in the last week of this semester.

2. Template

The mini-case study should at least include the following components:

1) Background of the deal (required)

This section should be a short description of the deal. Typically, you should include the industry background, overall market competitive environment, motivation of the deal from both the acquirer and the target sides, etc.

2) Timeline of the deal (required)

This section should capture the timeline for major events in the deal, such as the first announcement date, the shareholder approval date, the regulatory approval date (if there is any anti-trust or other regulatory related issues), the competitor bidding date (if there are multiple bidders in the deal), and the date of deal completion, etc. You should include all dates for major events.

3) A short event study for the announcement effect (Optional)

This selection should include a simple event study of the announcement effect for the acquirer and the target.  (see the  slides  and videos of the event  study on the course website; once again, this component is optional)

4) A short discussion of the valuation and pricing of the deal (Optional)

This section should capture some basic valuation exercises that you have learned in previous corporate finance courses. You can employ any techniques that you are familiar with, such as the discounted cash flow approach and financial multiplier approach. This component is also optional, but might be more important if your behavioral stories are related tomisvaluation.

5) Behavioral aspects in this deal (most important section)

In this section, you should discuss all behavioral aspects in this deal. I list some potential topics that you may want to explore but you are NOT limited to these topics. We will offer a premium (i.e., higher grades) to new and interesting topics that are not listed here (DO NOT write a report that tries to answer all questions below):

a) is this deal driven by misvaluation?

b) is this deal driven by manager’s overconfidence?

c) is this deal driven by manager’s personal incentives, such as empire building or entrenchment?

d) does the acquirer, the target, or competing bidder have any strategic behavior in this deal?

e) do investors and other stakeholders (e.g., customers, suppliers, competitors) underreactor overreact to any information?

f) do any social issues, such as “who will be the new CEO”, affect any important aspects of this deal, during or after negotiation?

g) are there any strategic disclosures made by the acquirer or the target during the deal? What are the economic incentives behind these disclosures?

h) is this deal affected by any geopolitical risks?

…

Note: Depth is always more important than breadth. Focusing on one good point with detail and depth is much better than superficially discussing many dimensions.

3. Information Source

Accounting and Stock Information: Bloomberg/Google Finance