Training

Merger of the Minds

At UCLA, the breadth and depth of the intensive M&A program is ''like taking a drink from the fire hose.''
Craig SchneiderAugust 1, 2003

When it comes to mergers and acquisitions, finance chiefs can never have too much information.

Just ask Danny Gampe, CFO of assisted living service provider LivHome Inc. The company’s first acquisition in February, says Gampe, he owes in part to being inundated with useful information at the UCLA Anderson School’s one-week M&A program last summer. “It’s kind of like taking a drink from the fire hose,” he says of the executive education course material. “Well done, but very intense.”

It’s not just the intensity that sets the program apart from other schools, maintains Prof. J. Fred Weston, faculty director of the program. “The breadth of topic coverage, I think, is one of our strengths,” he says. “Other programs tend to focus on integration or specific aspects, and we’ve tried to have a balanced program.”

Gampe notes that Weston, who has more than 50 years of experience in teaching, research, and publishing on M&A and managerial finance, was by himself a huge draw.

The Anderson M&A program focuses on topics including corporate strategy, team decision making, integrating corporate cultures, valuation, global strategy, negotiations, human resource issues, legal issues, M&A communication, accounting rules, restructuring strategies, tax strategies, and deal structures. It also addresses these strategies as they relate to policies across industries and business growth cycles, using several case studies as illustration.

The program is part lecture and part class discussion, with some small breakout team workshops. There are typically about 40 participants in all, including CEOs, CFOs and other executives at small to midsize companies, both foreign and domestic.

Weston keeps things current. He’s rewriting his opening lecture to include lessons illustrated by General Electric’s retired chief executive Jack Welsh and IBM’s Louis Gerstner Jr.; he notes that during their tenures, each exemplified many of his central themes of the right and wrong way to do deals. “Mergers work if they enhance your capabilities in the areas where you have experience,” says Weston. “A firm has to have a strategy, and it has to have all the other elements of running a firm effectively, and then use M&A to add capabilities that fit in.”

Weston also plans to use such present-day examples as Oracle’s bid for PeopleSoft, to emphasis the importance of knowing one’s industry, as well as the high-profile AOL Time Warner merger when it come times for lessons relating to goodwill impairment.

Other program faculty take a closer look at some more-specific topics. David Lewin, professor of human resources and organizational behavior, leads the discussions on team decision-making and negotiations. FedEx Corp.’s acquisition of Flying Tiger, which transformed FedEx from a mostly domestic company to an international carrier, is used in discussions of merging diverse corporate cultures.

Ian Campbell, a managing director of consultancy The Abernathy MacGregor Group, addresses the issue of M&A internal and external communications. The lesson demonstrates the importance, early in the process, of explaining the business logic of the deal in simple terms, says Weston. “That’s true [not only] for communication with people in the company and from the financial community,” he notes, “but also antitrust regulators, to get through that first review and not be asked for a second review.”

James Freedman, managing director at Barrington Associations, a Los Angeles-based investment bank, discusses M&A trends in the middle market. He also provides the class with eight case studies (five worked, three did not).

Finance executives who crave insight into deal valuation get their fix when the course examines discounted cash flow models and the use of multiples. Mergerstat allows course participants free access to their M&A database for the week, says Weston, “if they’re looking at a company and want to do their own comparables.”

Most of the case studies in the course deal with large, multinational companies. But Gampe says that even for a small, private company such as LivHome, the material is valuable. “My task was to go in and glean what I could and put it in a perspective for our business,” he says. “They presented the information in such a way that you could fit it into your own environment, and they could answer your own questions.”

What was Gampe’s big take-home message? “You can do all the valuation work you want, you can legalize everything, [but] it comes down to culture and fit,” Gampe says. “The fit really has to be there in order to be successful.”

The “Mergers and Acquisitions Program” will be presented at the University of California, Los Angeles, on September 14-19, 2003, and on March 21-26, 2004.