VIB-MB16

VIB-MB16
MBA 2016-18: Term-V

Valuation and Investment Banking (VIB)

Credits	3.0
Faculty Name	Banikanta Mishra
Program	MBA
Academic Year and Term	2017-2018 Term-V

1. Course Description: This course is a blended introduction to Valuation and Investment Banking (IB). It would combine theory and practice. Moreover, we would have both qualitative and quantitative discussions on most topics, the latter mainly being numerical examples (not any rocket science or high-flying calculus).

First, building on the basics of valuation that you were exposed to in Financial Management, we would familiarize ourselves more intimately with the building-blocks of valuation. We will learn about different valuation methods and consistency between them as well as about treatment of capital structure under different situations (like constant debt and constant debt-ratio). We will also learn about different alternatives to the DCF valuation approach. We will also take up valuation of LBOs, real options, and convertibles and, if time permits, touch upon corporate control transactions.

In the next part, after gaining an idea into what IB is and understanding the basics of Trading, we would study in detail the capital-raising process, mainly Underwriting and Syndication. Here, we would learn about IPO and SEO and ADR and GDR as well as about NIF and RUF. We would also get familiar with Euromarket and the innovative Euro instruments like Euronote and Euro-CP as well as Eurobond and Euroequity. This would also give an opportunity to get a glimpse into Financial Engineering in debt and equity instruments as well as about Structured Financing. We would then talk about MADS (merger, acquisition, divestiture, and spinoff) and learn how to evaluate them. Wealth Management and Mutual Fund would commence one of our focus areas, and, here, we would learn how an AMC works. This would lead to an insight into Hedge Funds and Private Equity. In that light, we would also talk about LBOs and LBO valuation. Project Financing (PF) and PPP (Public Private Partnership) would be touched upon, with a discussion of their forms and Risk Management techniques in PF. We would end with Securitization, wherein we would study about MBS and ABS as well as about CMO, understanding the beauty and risks of these instruments and innovations like IO and PO that have accompanied them.

2. Student Learning Outcomes (typically 3-5 bullet points):
ü Be able to understand the complexities of valuing a firm and enterprise
ü Be able to value a project and firm using different valuation approaches
ü Be able to understand the consistencies, or lack thereof, between various valuation approaches
ü Be able to understand the detailed capital-raising process and securitization
ü Be able to understand investment banking institutions like private-equity and hedge-fund

3. Required Text Books and Reading Material

The class discussions and handouts would be exhaustive and self-sufficient. But I would refer to the following books for topics they cover well; they are referred to in the Session Plan by the two-letter code. For cases, you would need to refer to Case Problems in Finance by Carl Kester, Richard Ruback, and Peter Tufano (McGraw Hill International Edition, Twelfth Edition).

TJ: Valuation, Sheridan Titman and John Martin, Prentice Hall, 2010
BS: Corporate Finance: A Valuation Approach, Simon Benninga and Oded Sarig, Irwin/McGraw-Hill, 1996

BC: Corporate Valuation, Bradford Cornell, McGraw Hill, 1993

CK: Valuation: Measuring and Managing the Value of Companies, McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels, Wiley, 2010

PR: Valuing a Business, Shannon Pratt, Robert Reilly, and Robert Schweihs, McGraw Hill, 2000

GT: Financial Markets & Corporate Strategy, Mark Grinblatt and Sheridan Titman, McGraw Hill, 2001

DS: An Introduction to Investment Banks, Hedge Funds, and Private Equity: The New Paradigm, David Stowell, Academic Press – Elsevier, 2010

RP: Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions, J Rosenbaum and J Pearl, John Wiley, 2009

SW: Global Banking, RC Smith, I Walter, and G DeLong, Oxford University Press, 2012

TL: The Business of Investment Banking: A Comprehensive Overview, K Thomas Liaw, John Wiley, 2012

4. Tentative Session Plan: No of Sessions [Reference]

I. Introduction to Valuation: 2 [TJ]
Recap of the four approaches: CCF, FCF, APV, and CFE
Consistency between the Approaches under Infinite and Finite Life
LBO Valuation

II. Advanced Topics in Valuation: 2 [TJ]
Using Decision Trees in Valuation
Using Binomial Tree for Valuing Real Option
Cross-Border Valuation

III. Introduction to Investment Banking: 2 [TL]
Investment Banking (IB) is what IBers (Investment Bankers) Do
Types of Investment Banks
Trends in IB
IB in BRICS countries and Asia
Trading: Brokerage and Market-Making
Market Microstructure

IV. Capital Raising Process: 2 [SW]
Underwriting, Syndication, Private Placement
IPO (Initial Public Offering) and SEO (Seasoned Equity Offering)
NIF (Notes Issuance Facility) and RUF (Revolving Underwriting Facility)
Euronote, Euro-CP (Commercial Paper), Euro-MTN (Medium Term Note)
Innovations in Debt, Equity, and Currency-based Instruments
Credit Derivatives and Interest-Rate Swaps
Structured Financing
STRIPS, Americus Trust (Dividend Only and Growth Only securities)
V. MADS: 2 [RP]
Merger & Acquisition
Motivation for M&A
Evaluation of M&A Deals
Cross-Border M&A
Divestiture and Spin-Off
Equity Carveout
Takeover Defences

VI. Wealth Management and Mutual Fund: 1 [SW]
Wealth Management
Pension Management
Portfolio Management
Mutual Funds: Varieties
ETF
Evaluating MF
Managing MF AMC (Asset Management Companies)
REIT

VII. Hedge Funds: 1 [DS]
Overview and Recent Performance
Leverage
Market Liquidity and Efficiency
Lockups, Gates, Side-Pockets
HF versus PE (Private Equity) and MF (Mutual Fund)
High-Water Marks and Hurdle Rates
Public Offerings
Hedge-Fund Strategies

VIII. Private Equity: 2 [DS]
PE Transaction Participants
Structure of a PE Fund
Capitalization of a PE Transaction
Leveraged Recapitalization
PIPE (Private Investment in Public Equity)
Equity Buyouts
PE IPO
VC (Venture Capital) and PE

IX. Asset-Based and Project Financing: 2 [SW]
Structure of a PF Deal
BOT (Build Operate Transfer) Model and Its Variants
PPP (Public Private Partnership)
Concession Agreement
Swiss Challenge
Identifying PF Risk
Managing PF Risk
Take or Pay and Take & Pay Contracts
Input-Price Swap and Output-Price Swap
Other PF Risk Management Techniques
International Payment

X. LBO (Leveraged Buy Out): 2 [RP]
Economics of LBOs: Return Analysis
Exit or Monetization Strategies
Financing Structure of LBO
LBO Valuation: The Nitty Gritties

XI. Securitization: 2 [TL]
Asset-Backed Security, Mortgage-Backed Security
Pay-Through and Pass-Through
Securitization Structure and Credit Enhancement
CMO (Collateralized Mortgage Obligation)
Prepayment (or Call) Risk and Extension Risk
Floaters and Inverse Floaters, IO and PO

6. Evaluation:
CP (Class Participation) 10%
CR (Two Brief Case Reports: Response to Selected Questions) 20%
ME (Midterm Exam) 30%
FE (Final Exam) 40%

CP: Your score on this front would depend on your attendance and your involvement in the class discussions (especially answering questions and raising interesting issues).

CR: We would discuss a case each in the 6th (Week-3) and 18th (Week-9) class. So, there would be two in all. You should submit, at the beginning of the class, a Group Case Report - in hardcopy format - addressing merely those questions assigned by me below, which would require you to focus only on selected parts of the case. Even if you opt not to submit Case Report for any case, I urge you to study the case, so that you can enjoy and learn when we discus it in the class. Here are the case questions.

ME: This would be a closed-book exam held in class. You would be allowed to bring in one A6-size paper, writing whatever you want on its two sides. Questions would be a combination of conceptual, theoretical, and numerical (can be subjective or objective).

FE: This would be a closed-book exam held in class. You would be allowed to bring in one A6-size paper, writing whatever you want on its two sides. Questions would be a combination of conceptual, theoretical, and numerical (can be subjective or objective).

7. Code of Ethics:

You must abide yourself by the (unwritten) Code of Ethics for Students.
For individual (group) assignments/examinations/projects, it is unethical to seek any direct help from others (other groups), whether or not you make use of the help. Besides, other forms of dishonesty (like plagiarism) would also invite severe punishment. Moreover, for a group assignment, all members of the group should contribute to the preparation of the report (no free-riders), and no direct help should be sought or taken from persons outside the group.
Discussion among individual students and groups (except in the examination hall or class-room) is, of course, always encouraged. But, the final report or solution should be totally in your (your group’s) own style and language; any form of copying from another student (or group) or from any outside source is a serious offense. Moreover, you (or, wherever relevant, each member of your group) must fully and clearly understand every word and every step written in your (your group’s) report.

Your basic purpose should be to learn, without resorting to any unfair means for getting a higher score/grade. If you resort to any unfair means, including, but not limited to, the ones mentioned above, you would receive an F in the course; I may also recommend to the Institute for your expulsion.

8. Academic Integrity (taken verbatim from the University of Texas, Dallas, format):

The faculty expects from its students a high level of responsibility and academic honesty. Because the value of an academic degree depends upon the absolute integrity of the work done by the student for that degree, it is imperative that a student demonstrate a high standard of individual honor in his or her scholastic work.

Scholastic dishonesty includes, but is not limited to, statements, acts or omissions related to applications for enrollment or the award of a degree, and/or the submission as one’s own work or material that is not one’s own. As a general rule, scholastic dishonesty involves one of the following acts: cheating, plagiarism, collusion and/or falsifying academic records. Students suspected of academic dishonesty are subject to disciplinary proceedings.

Plagiarism, especially from the web, from portions of papers for other classes, and from any other source is unacceptable and will be dealt with under the university’s policy on plagiarism (see general catalog for details). This course will use the resources of turnitin.com, which searches the web for possible plagiarism and is over 90% effective.

Created By: Alora Kar on 08/13/2014 at 01:40 PM
Category: BM-II 2016-18 T-V Doctype: Document

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