FINANCE 455/LAW 324 - Corporate Restructuring

Course Description

This interdisciplinary course examines the finance, economics, law and business strategies that underlie major corporate restructuring transactions. These transactions include: mergers, acquisitions, tender offers, bankruptcy, leveraged buyouts, leveraged cash-outs, sell-offs, spin-offs, equity carve-outs, share repurchases, liquidations, reorganizations, recapitalizations, and the creation of tracking stock.

The course begins with a brief review of techniques that are used to evaluate the financial implications of restructuring transactions and an introduction to key legal principals. The course then turns to the structure of the large-scale, public corporation. We discuss the market forces and legal rules that are designed to facilitate restructurings, as well as resolve potential conflicts of interest between corporate managers and stockholders. The course then discusses the theoretical rationale for each of these transactions and examine their effects on the welfare of managers, stockholders and other corporate stakeholders. The role of hostile takeovers is examined, as well as the uses and abuses of defensive tactics such as share repurchases, poison pills, golden parachutes, etc. The course reviews the empirical evidence regarding the effects of such defensive tactics on stockholder wealth.

One common theme that runs throughout the course is identifying the legal precedents that affect restructurings. The state and federal laws and judicial decisions that govern restructuring transactions are examined, as well as how this set of regulations affects the various corporate stakeholder groups. The course examines leveraged transactions and determine what role they play in the restructuring process. The course finishes with an examination of current bankruptcy laws and their efficiency in allocating the resources of financially distressed firms through the liquidation / reorganization decision.

After covering the relevant concepts, institutional and regulatory settings, and empirical evidence of each transaction type, students will be required to analyze, in detail, real-world cases that are designed to highlight the important aspects of various transaction types.

Prerequisites

FINANCE 351, Corporate Finance; Second-year standing or permission of the instructor.

Course Materials

All materials are included in the coursepak and/or an electronic reading list.

Course Website