This page assembles literature relevant to financial valuation and strategy in various contexts of corporate and financial decision making matched by course themes. While all links point to interesting and worthwhile readings you are not expected to work through all the material. Instead, you should choose in decreasing order (i) assigned readings, (ii) recommended material, and, finally, (iii) material of personal or professional interest. Please refer to the syllabus for each class meeting's assigned and recommended readings.

Introduction: M&A in the Old and New Economy

Corporate Finance, M&A and Valuation Challenges

  1. The Changing Face of M&A: Challenges and Issues

    Holmström and Kaplan (2001), "Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s," Journal of Economic Perspectives 15: 121-144

  2. Valuation beyond Net Present Value: Puzzles and Answers

    Fernández (2001), "Company Valuation Methods: The Most Common Errors in Valuation," mimeo, IESE

    Pettit, Gulic and Park (2001), "The Equity Risk Measurement Handbook," EVAluation 3 (3) 2001

Options Review

Foundations: Valuation of Corporate Flexibility

Options in Corporate Finance

  1. Introduction to Real Options

    Copeland and Keenan (1998), "Making Real Options Real," McKinsey Quarterly 1998 (3): 128-141

    Amram, M. and N. Kulatilaka (2000), "Strategy and Shareholder Value Creation: the Real Options Frontier," Journal of Applied Corporate Finance 13 (2): 8-21

  2. Corporate Finance Applications of Option Theory

    Mauboussin (1999), "Get Real: Using Real Options in Security Analysis," CSFB June 1999

Real Options

  1. Option Pricing: An Introduction to Binomial Models

    Hauswald (2002), " Real Options Analysis," Technical Note, KBS-AU (FIN-02-002)

  2. Models of Real Options Valuation

    Damodaran (1999), "The Promise and Peril of Real Options," mimeo, NYU

    Luehrman, T. (1998), "Investment Opportunities as Real Options," Harvard Business Review July-August 1998.

Start-up Finance

Valuing Start-Ups

  1. Entrepreneurial Valuation Techniques

    Campbell and Hulme (2001), "The Winner-Takes-All Economy," McKinsey Quarterly 2001 (1): 82-93

    Häcki and Lighton (2001), "The Future of the Networked Company," McKinsey Quarterly 2001 (1): 26-39

    Rajgopal et al. (2000), "The Relevance of Web Traffic for Stock Prices of Internet Companies," mimeo, University of Washington

    "The Race to Build the Broadbank Kingdom," Goldman Sachs 1999

    A Note on Valuation in Private Equity Settings, HBS 1997 (9-297-050)

  2. Case 1: Penelope's Personal Pocket Phones, HBS 1999 (9-299-004)

    Jansen and Perotti (2002), "Valuation of Internet Companies: A Survey of the Evidence," mimeo, University of Amsterdam

    Copeland (2000), "Real Options Valuation of Startup Companies," Chapter 8

IPOs and Trade Sales

  1. IPOs 

    Ritter (2008), "Some Factoids About the 2008 IPO Market," mimeo, Florida
    Ibbotson, Sindelar and Ritter, "The Market's Problems with the Pricing of Initial Public Offerings," Journal of Applied Corporate Finance, Vol. 7,No.1 (Spring 1994), pp. 66-74
    Hsuan-Chi Chen and Jay R. Ritter, "The Seven Percent Solution," Journal of Finance, Vol. 55, No. 3 (June 2000), pp. 1105-1131

  1. Case 2: Symantec Corporation: Acquiring Entrepreneurial Companies, Stanford 1996 (S-SM-27)

    Frick and Torres (2002), "Learning from High-Tech Deals," McKinsey Quarterly 2002 (1): 113-123

    Fernández (2001), "Valuing Real Options: frequently Made Errors," mimeo, IESE

Acquiring Young Companies

  1. Bidding for Assets: An Auction Primer

    Milgrom, Paul, (1989), "Auctions and Bidding: A Primer," Journal of Economic Perspectives 3: 3-22

    Simonson, D. (1987), "The Winner's Curse in the M&A Game," United States Banker (98:12), December 1987: 68-69

    Coff, Russell W. (1999), "How Buyers Cope with Uncertainty when Acquiring Firms in Knowledge-Intensive Industries: Caveat Emptor," Organization Science 10: 144-161

  2. Case 3: The Mead Johnson Nutrition IPO, KSB-AU 2010 (FIN-10-001)

Mergers and Acquisitions

Large-Scale Acquisitions

  1. M&A Valuation: Intrinsic Value and Synergies

    Varaiya, N. (1988), "The 'Winner's Curse' Hypothesis and Corporate Takeovers," Managerial and Decision Economics 9: 209-219

    Gandhok, Dwivedhi and Lal (2001), "Evaluating Mergers and Acquisitions - How to Avoid Overpaying," EVAluation 3 (8) 2001

    Herath and Jahera (2002), "Real Options: Valuing Flexibility in Strategic Mergers & Acquisitions as an Exchange Ratio Swap," mimeo, UNBC

  2. Case 4: Bidding for Antamina, HBS 1997 (9-297-054)

    Hansen, Robert G. (2001), "Auctions of Companies," Economic Inquiry 39: 30-43

    Moel and Tufano (2001), "When are Real Options Exercised? An Empirical Study of Mine Closings," mimeo, HBS

Divisional Acquisitions

  1. M&A Valuation: Corporate Cooperation as Options on Synergies

    Smit (2001), "Acquisition Strategies as Option Games," Journal of Applied Corporate Finance 14 (2): 79-89

    KPGM (2001), Synergies: A Business Guide, KPMG Consulting

  2. Case 5: Telefónica de Argentina S.A., HBS 1992 (9-292-039)

    James and Koller (2000), "Valuation in Emerging Markets," McKinsey Quarterly 2000 (4): 78-84

Acquisitions and Restructurings in Emerging Markets

  1. The Record on M&A: Event Studies in Finance

    Hauswald (2002), "Event Studies," Technical Note, KSB-AU (FIN 02-005)

    MacKinlay, A. Craig (1997), "Event Studies in Economics and Finance," Journal of Economic Literature 35: 13-39

    World Class Transactions. Insights into Creating Shareholder Value through Mergers and Acquisitions, KPMG 2001

  2. Case 6: Hewlett Packard and Compaq, KBS-AU 2002 (FIN-02-006)

    Morck, Shleifer and Vishny (1990), "Do Managerial Objectives Drive Bad Acquisitions?" Journal of Finance 45: 31-48

    KPGM (1999), Merger and Acquisition Integration: A Business Guide, KPMG Consulting

Valuation and Execution Pitfalls

  1. Valuation, Growth Projections and the M&A Process

    Bekier, Bogardus and Oldham (2001), "Why Mergers Fail," McKinsey Quarterly 2001 (4): 6-9

    Soter (2001), "M&A - Why Most Winners Lose," EVAluation 3 (4) 2001

  2. Case 7: The Merger of AOL and Time-Warner, RBHH (2001)

    Roll, Richard (1986), "The Hubris Hypothesis of Corporate Takeovers," Journal of Business 59: 197-216

Financial and Strategic Failure

  1. Financial Distress, Refinancing and Recapitalizations

    Hauswald (2003), "Technical Note: Assessing Financial Distress (Abridged)," KBS-AU (FIN-03-003)

    Andrade and Kaplan (1998), "How Costly is Financial (not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed," Journal of Finance 53: 1443-1494

    Bae, Hendershott and Jo (2000), "Choosing an Organizational Form: Leveraged Buyouts versus Leveraged Recapitalizations," mimeo, Santa Clara University

    DeAngelo, DeAngelo and Wruck (2001), "The Collapse of LA Gear," mimeo, USC

  2. Case 8: BofA and FleetBoston: Illusive or Elusive Synergies in Banking? KSB-AU 2004 (FIN-04-002)
    DeLong (2002), "Focusing versus diversifying bank mergers: analysis of market reaction and long-term performance," mimeo, CUNY
    Bliss and Rosen (2001), "CEO Compensation and Bank Mergers," mimeo, Indiana
    Kwan and Wilcox (1999), "Hidden Cost Reductions in Bank Mergers: Accounting for More Productive Banks," mimeo FRB of San Francisco

Restructuring

Nanda, A. and P. Williamson (1995), ``The Use Joint Ventures to Ease the Pain of Restructuring," Harvard Business Review November-December 1995.

Alternatives to M&A

  1. Corporate Partnerships: Joint Ventures and Other Strategic Alliances

    Ernst and Halevy (2000),"When to Think Alliance," McKinsey Quarterly 2000 (4): 47-55

  2. Case 9: Euronext and NYSE, KBS-AU 2007 (FIN-07-001)

Releasing Value: Spin-Offs and Tracking Stocks

  1. Targeted Stock, Spin-Offs and Partial Floatations

    Anslinger, Bonini and Patsalos-Fox (2000), "Doing the Spin-out," McKinsey Quarterly 2000 (1): 99-105

    Allen (2001), "Private Information and Spin-off Performance," Journal of Business 74: 281-306

    Haushalter and Mikkelson (2001), "An Investigation of the Gains from Specialized Equity: Tracking Stock and Minority Carve-Outs," mimeo, University of Oregon

  2. Case 10: What Next? The NYSE’s Takeover of Euronext, KSB-AU 2007 (FIN-07-001)

    Coff and Laverty (2002), "Dilemmas in Exercise Decisions for Real Options on Core Competencies," mimeo, Emory University

Current Trends in M&A

The Practice of M&A

  1. Corporate Disclosure and Regulation

  2. Case 10: Playing Russian Roulette: Liberty Media's Acquisition of QVC, KSB-AU 2004 (FIN-04-001)

    Hewitt, Ian, Thomas Schmuck and Martin Wright (2001), "Joint Ventures and Alliances. A Guide to the Legal Issues," mimeo, Freshfields Bruckhaus Deringer, November 2001

    Campbell, Elise and Jeffrey Reuer (2001), "International Alliance Negotiations: Legal Issues for General Managers," Business Horizons January-February 2001: 19-26

    Dranikoff, Koller and Schneider (2002), "Divesting Proactively," McKinsey Quarterly 2000 (4): 78-84

  3. Summary and Conclusion: From Corporate to Financial Strategy