The University of Southampton
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MANG6296 Advanced Corporate Finance

Module Overview

The module introduces concepts of Advanced Corporate Finance, which combines aspects of corporate finance and value-based management. The focus is on understanding the relationships between investments and financing decisions on shareholder value. Analysing these relationships is essential in managing a firm for value. The module introduces the concept of firm valuation using DCF or alternative methods. Strategic decisions on capital structure, investment policy (e.g. diversification), corporate governance and dividend policy are examined with regard to their value creation potential. The module is a compulsory module on the MSc Finance, as it combines strategy various disciplines such as finance, accounting and management. The module will focus on case studies to highlight its practical relevance. It builds on the material covered in Introduction to Finance (MANG6295) taught in semester 1. In contrast to more specialised modules taught on the MSc Finance, the proposed module integrates corporate finance and accounting into the wider strategic issues companies face. The module will be taught in the second semester, and Introduction to Finance (MANG6295) is a pre-requisite to studying this module. The module will introduce methods developed in finance to value companies, to assess investment decisions and to analyse other strategic decisions (e.g. mergers and acquisitions). However, the module will stress the relationship between value creation (finance) and management decisions. This is different compared to finance module offered on other programmes (e.g. MSc International Financial Markets, MSc International Banking and Financial Studies). Hence, it is not a standard finance module. The module will be also available as an option for the MSc Risk and Finance. The module bridges the gap between providing a functional expertise in finance and applying the concepts of finance in practice.

Aims and Objectives

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • linking management decisions to value creation
  • how companies are valued in the context of financial markets
  • analysing investment and financing decisions
Transferable and Generic Skills

Having successfully completed this module you will be able to:

  • analyse financial information
  • develop quantitative models
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • develop their own valuation models in Excel
  • analyse financial statements
  • analyse strategic decisions (e.g. mergers & acquisitions)
  • interpret financial information
  • relate value creation to management decisions
  • critically evaluate investment and financing decisions

Syllabus

The module offers a comprehensive introduction to Advanced Corporate Finance. Students will learn various analytical tools to analyse the value creation potential of companies and to make investment decisions. Company valuation and value creation: The first part (8 hours of lectures) will cover a wide range of valuation methods used to value a non-financial company. The participants will learn how to apply these methods to value companies outside-in and inside- out, which provides insights into value based management and valuation from an equity investment perspective (e.g. equity analysis, mergers and acquisitions). Apart from a rigorous introduction of analytical tools, the course will enable participants to apply the acquired knowledge in practice using case studies and simulations. Investment Decisions: The second part (4 hours of lectures) aims to provide students with an introduction to investment analysis. Strategic aspects of investment decisions will be addresses that account for industry specific effects (e.g. market concentration). We will also assess various strategies such as diversification across countries and products. Financing Decisions: The third part (4 hours of lectures) highlights the importance of capital structure and access to external finance. We discuss various forms of equity and debt issues. The theoretical aspects of capital structure as well as practical issues will be analysed. This part also covers working capital management and short-term liquidity needs. Mergers & acquisitions: The fourth part (4 hours of lectures) illustrates the concepts (value creation, investment and financing) in the concept of mergers and acquisitions. In particular, we address the assessment of synergies and various ways to finance acquisitions.

Learning and Teaching

Teaching and learning methods

Teaching methods include: The module will be taught by a mixture of methods ranging from guided background reading, lectures, group work and the exploration of mini case studies. The lecturer will draw upon market developments current at the time of the course. The lecturer will introduce the concepts, and participants will have the opportunity to practice and apply the methods discussed. We will do a step-by-step valuation of several companies to illustrate the benefits and disadvantages of different methods. Participants will develop EXCEL valuation models that can be modified for their own use. Learning activities include: Excel based exercises in class A group assignment Presentation of findings in class

TypeHours
Independent Study126
Teaching24
Total study time150

Resources & Reading list

Economist. Magazine

Financial Times. Newspaper

Elton, J.E and M.J. Gruber (1995). Modern Portfolio Theory and Investment Analysis. 

Blake, D (2000). Financial Market Analysis. 

Koller, T., Goedhart, M. and D. Wessels (2010). Valuation: Measuring and Managing the Value of Companies. 

Graham, B. and D.Dodd (2008). Security Analysis. 

Cuthbertson, K. and D. Nitzsche (2001). Investments - Spot and Derivatives Markets. 

Horn, T.W. (2008). Unlocking the Value of a Business. 

Graham, B., Zweig, J. and W.E. Buffett (2003). The Intelligent Investigator: The Definitive Book on Value Investing. A Book of Practical Counsel. 

Fisher, P.A. (2003). Common Stocks and Uncommon Profits and Other Writings. 

Assessment

Formative

Coursework

Summative

MethodPercentage contribution
Examination  (2 hours) 70%
Group Assignment  (3000 words) 30%

Repeat

MethodPercentage contribution
Examination  (2 hours) 100%

Referral

MethodPercentage contribution
Examination  (2 hours) 100%

Linked modules

Pre-requisites

To study this module, you will need to have studied the following module(s):

CodeModule
MANG6295Introduction to Finance
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