Kelley MBA students learn about corporate mergers from an insider’s perspective

Tech firms, particularly semiconductor makers, have been driving M&A activity

Tech firms, including semiconductor makers, have been involved in a record level of mergers and acquisitions.

According to a report issued last week, 2014 was a record year for mergers and acquisitions activity worldwide in the tech sector. UK-based Mooreland Partners said such M&A deal flows grew by 14 percent and totaled more than $1 trillion.

While “deals of the day” aren’t a new phenomenon, it obviously is more important than ever for business students to understand the decision-making process and strategies behind corporate bids, mergers and acquisitions.

This Friday is Mergers and Acquisitions Day at Indiana University’s Kelley School of Business. The event gives first-year students in Kelley’s Strategic Finance Academy an opportunity to evaluate an actual proposed merger and present their analysis to executives who were the decision makers.

Coming to Bloomington from Carlsbad, Calif., is Adam Spice, chief financial officer at MaxLinear. Joining him via video conferencing will be Steven Ananias, formerly the senior vice president and CFO of Newport, Calif.-based Mindspeed Technologies.

Little more than a year ago, Mindspeed became the focus of a flurry of takeover rumors, with MaxLinear among the possible bidders. Ultimately, Mindspeed was acquired by Massachusetts-based MACOM, which has several operations in Silicon Valley. Ananias today is chief operating officer of BookingPal.

Adam Spice

Adam Spice

Students on Friday will revisit the deal from Spice and Ananias’ perspectives and then explain — and even defend — how they reached their decisions on whether to merge two firms.

“What I’m having students do is look at that deal, not through the lens of hindsight, but in the context of what was known at the time,” said Scott Smart, associate chair of Kelley’s Full-Time MBA Program and the Whirlpool Finance Faculty Fellow. “The purpose of the exercise is to let students wrestle with this fairly complex decision in a business that itself is extremely complex and hard to understand.”

Afterward, the two executives will debrief students on the situation — what factors did they consider and why didn’t the deal work out?

Also involved in the discussion will be Jeff Thermond, a venture partner at Portola Valley, Calif.-based XSeed Capital and a Kelley alumnus. He has extensive experience in high-tech M&A deals.

Jeff Thermond

Jeff Thermond

Before the case presentations, Thermond and Spice will participate in a discussion about ethical dilemmas, discussing real situations they have faced and asking students how they would have reacted.

Company scale and innovation often drive deals

Smart, who directs the academy and who has experience as an M&A consultant, noted that such deals often are driven by two factors, scale and innovation.

For example, semiconductors are costly to produce and involve large fixed costs. It makes sense for firms to merge and improve the costs structure involved in production. In many cases, a larger firm wants to acquire new innovation through acquiring another company.

In the case that Kelley students are examining, both factors come into play.

At many business schools around the country, students work on cases that are older or are found within a textbook. M&A Day is unique in that it takes the case off the printed page and it involves the actual players who were involved.

“Technology is a growing percentage of GDP and yet it’s geographically concentrated in certain pockets of the country,” Smart said. “We’re making sure that we’re connected to what’s going on … This event adds value in the sense of strengthening the connection between the school and the players in this important industry.”

Kelley students learn about M&A activity year-round

While Friday is a big day around the Godfrey Graduate and Executive Education Center, students in the Strategic Finance Academy are engaged in activities year round.

Scott Smart

Scott Smart

They meet with speakers from a wide range of industries and travel to Silicon Valley and other locales for a closer look at the role financial professionals play at Fortune 500 firms. For the rest of the semester, students will be involved in consulting projects on actual problems for multinational and startup companies as well as non-profit organizations.

The Strategic Finance Academy is one of six career-focused academies within Kelley, which offer experiential learning and networking opportunities that are designed to give Kelley students an edge. Others specialize in business marketing, consumer marketing and consulting, for example.

“A lot of students particularly think that M&A is a real sexy area to work in finance,” said Smart, also a national expert on initial public offerings. “This is a way to get them to understand in a deeper way what it really means and what’s really involved in doing mergers and acquisitions.

“It’s exciting, but it’s also grueling,” he added. “Students get excited about the prospect of making decisions that involve hundreds of millions or billions of dollars, that drive the strategic direction of a firm, until they are the ones that actually have to make those decisions. They feel the pressure of having to be right about those decisions.”

M&A Day provides that “tougher and more realistic” experience.

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