Investment bankers advise firms on the type and pricing of securities. Investment bankers also market to the public a firm's stocks and bonds via an underwriting arrangement. Stock underwriting includes both initial public offerings (IPOs) and seasoned issues. Investment bankers also help firms design hybrid securities such as convertibles, bonds with warrants, and other exotic securities designed to meet a firm's specific project financing need or to appeal to particular investor desires or niches. Investment bankers advise and assist firms to: acquire other firms, sell their own firms, spin-off or sell specific operating units, go private through leveraged buyouts (LBOs) and management buyouts (MBOs).

This Class is Sponsored By:
 
 
 
Class Materials

Case Packet

A packet of Harvard Business School cases is available from the CU Bookstore.

Books

 Optional

        Investment Banking and Brokerage, John F. Marshall and M. E. Ellis, Kolb Publishing (Blackwell), 1994.

        Liar's Poker, Michael Lewis, Penguin Books, 1990.
       (Subject: Salomon Brothers during the 1980's)

        Barbarians at the Gate, Bryan Burrough and John Helyar, Harper Perennial, 1991.
        (Subject: the RJR Nabisco leveraged buyout in the late 1980's)

 Reference

 Corporate Finance

           Principles of Corporate Finance, Richard A. Brealey and Stewart C. Myers, Fifth Edition,
             McGraw Hill, 1996.

          Financial Management: Theory and Practice, Eugene F. Brigham and Louis C. Gapenski,
            Eighth Edition, Dryden Press, 1997.

          Corporate Finance, Stephen A. Ross, Randolph W. Westerfield, and Jeffrey F. Jaffe,
            Fourth Edition, Richard D. Irwin, 1996.

 Valuation

          Valuation: Measuring and Managing the Value of Companies, Tom Copeland, Tim Koller, and
                 Jack Murrin,  McKinsey & Company, Inc., Second Edition, Wiley, 1996.

         The Quest for Value, G. Bennett Stewart, III,  Stern Stewart & Company, Harper & Row, 1991.
 
Responsibilities:

Group

On the first day of class, students will self select into groups of four.  Each group will be responsible for submitting a written case analysis for each assigned case.  Additionally, the group will develop and prepare an IPO valuation and "road show" to be presented to other class members and industry judges at the end of the course.  These presentations will be rehearsed and professional with multimedia content.  The selection of firm and any pertinent information sources will be provided by the instructors later in the course.  This part of the course is a competition and therefore groups are cautioned regarding too much sharing of approach and presentation strategy.

All written case analyses should consist of a written report of approximately 5 pages plus supporting figures and tables. For grading purposes, each report must be FOLLOWED by a separate title page, which includes the names of all group members. No group member names should appear on other pages of the report. While you may freely reference outside sources including other groups of students, each written case and exhibits must be the group's own product and no portion can be copied or extracted from existing or other groups' write-ups.

Individual
 
This class is a limited enrollment class and attendance is required.  Students are expected to participate vigorously in the case discussions and are subject to cold call at any time.
 

Grading

The grading weights used to determine a course grade are:
 
 

Case Analyses, Write-ups and Informal Presentations	25%
Written and Oral Presentation of the IPO Project	30%
Term Paper and Related Presentation	30%
Individual Class Participation	15%

 
 
Tentative Course Outline
 

Date		Topic	Readings
August 26	Ron, Sanjai, Chris	Organizational Meeting: 4:45 Room 201
September 1	Ron: Intro   Chris: Case	Investment Banking:     Players and Markets   Case: Morgan Stanley
September 8	Ron: Funds Needed   Chris: Analysts and Due Dilig.	Cash Flow and Projection   Analysts and Due Diligence	TBA
September 15	Chris: Securities Law   Ron: Science Technology	Securities Law Basics   Case: Science Technology	TBA
September 22	Chris: Valuation I   Ron: Eskimo Pie	Valuation I   Case: Eskimo Pie	TBA
September 29	Chris : Valuation II   Ron: Interco	Valuation II  Case: Interco	TBA
October 8		Group Preparation Time
October 13	Sanjai:  IPO Regularities   Chris: Netscape's IPO             Times Mirror PEPS	Raising capital      Case: Netscape's IPO             Times Mirror PEPS	Readings C.W. Smith, Jr., "Investment Banking and the Capital Acquisition Process," Journal of Financial Economics 15, 1986, 3-30.   J. R. Ritter, “Initial Public Offerings,” Contemporary Finance Digest 2, 1998, 5-30.   W.H. Mikkelson, M.M.Partch, and K.Shah, “Ownership and Operating Performance of Companies that go Public,” Journal of Financial Economics 44, 1997, 281-308.   P. Gompers and J. Lerner, “What Drives Venture Capital Fundraising?” Harvard University working paper, 1997.   C.B. Barry and L.A.Turki, “Initial Public Offerings by Development Stage Companies,” Texas Christian University and Stanford University working paper, 1997.
October 20	Sanjai: Restructuring   Ron: John Case	Restructuring  Case: John Case	Readings P. G. Berger and E. Ofek, “Causes and Effects of Corporate Refocusing Programs,” 1997, University of Pennsylvania working paper.   L Daley, V. Mehrotra, and R. Sivakumar, “Corporate Focus and Value Creation: Evidence fron Spinoffs,” 1997, Journal of Financial Economics 45, 257-281.   S. Krishnaswami and V. Subramaniam, “Information asymmetry, Valuation, and the Corporate Spin-off Decision,” 1998, Tulane University working paper.   F. A. Schlingemann, R.M. Stulz, and R. A. Walkling, “Corporate Focusing and Internal Capital Markets,” 1998, Ohio State University working paper.   D. K. Denis and D. K. Shome, “An Empirical Investigation of Corporate Asset Downsizing,” 1998, Purdue University working paper.   J. J. McConnell, M. Ozbilgin, and S. Wahal, “Spinoffs, Ex Ante,” 1998, Purdue University working paper.   H. Desai and P. C. Jain, “Firm Performance and Focus: the Case of Spinoffs,” 1996, Tulane University working paper.  Paper Proposal Due (See December 1)
October 27	Chris  Chris	Alternative Securities Exercises        (Intro to Convertibles and         Financial Engineering)  Case: Alza (A) and (B-1)
November 3	Sanjai: Mergers and Acquisitions   Ron: Time, Inc.	Mergers and Takeovers  Case: Time, Inc.	Readings D. Oesterle, “Revisiting the Anti-Takeover Fervor of the ‘80s Through the Letters of Warren Buffett,”Cardozo Law Review, 1997.   S. Bhagat, A. Shleifer, and R.W. Vishny, "Hostile Takeovers in the 1980s: The Return to Corporate Specialization," Brookings Papers on Economic Activity, 1990, 1-84.   S. Bhagat, D. Hirshleifer and R. Noah, "Do Takeovers Create Value?: An Intervention Approach," 1998, University of Michigan working paper.   S. N. Kaplan, M.L. Mitchell, and K.H. Wruck, “A Clinical Exploration of Value Creation and Destruction in Acquisitions,” 1997, University of Chicago working paper.
November 10	Sanjai: International Trends  Sanjai:	Mergers and Takeovers
November 17	Sanjai: Sales and Trading  Sanjai:	Investment Banker Fees, Contracts, and Creations	Readings J.R. Kale, O. Kini, and E. E. Ryan,"On the Participation and reputation of Financial advisors in Corporate acquisitions," Emory University working paper, 1998.   R. M. McLaughlin, “Investment banking contracts in tender offers: An empirical analysis,” 1990, Journal of Financial Economics 28, 209-232.   R. M. McLaughlin, “Does the form of compensation matter? Investment banker fee contracts in tender offers,” 1992, Journal of Financial Economics 32, 223-260.   P. Tufano, “Securities Innovations: A Historical and Functional Perspective,” 1995, Journal of Applied Corporate Finance 7, 90-104.   P. Tufano, “Financial Innovations and First Mover Advantages,” 1992, Journal of Applied Corporate Finance 5, 83-87.
November 24		Group Preparation Time	Day Before Thanksgiving  Paper Due at 9 am, Nov 25 (See December 1)
December 1	Sanjai: Trends	Paper Presentation	The proposal should answer the following two questions: What will the paper be about? Why is this topic interesting and important? You should also include a list of at least four academic papers that you intend to read as background for your paper. The proposal should be no more than a page.   The paper can be on any topic that will be covered in the course. You can either do a critical survey of the literature and/or include some original analysis. The paper (including exhibits) should be between twelve and fifteen typed, double-spaced pages (twelve-point font, one-inch margin all-around).   The paper is a group exercise. While you are welcome and encouraged to talk to your friends, work-associates, instructors, etc. regarding ideas, facts, institutional practices, real cases, and so on, the group should write the paper without assistance from anyone outside the group. The paper proposal is due on October 20, 1998, before the start of class.  The paper is due on November 25, 1998, at 9 am in Professor Bhagat’s office (BUS 490). Similarly, the presentation is also a group exercise. Presentations will be done in class on December 1, 1998. All students in the same group will get the same grade for the term paper proposal, write-up, and presentation.
December 8	Ron, Sanjai, Chris	IPO Presentation	Melicher and Leach will provide deadlines and formats.

 
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