By role-playing, MBA students get a real feel for mergers and acquisitions, as Steve McCormack found out

It's the day-long mergers and acquisitions (M and A) exercise for MBA students at City University's Cass Business School. The scenario being played out is entirely fictional, but has the ring of authenticity to it.

A struggling food and chemicals business, Global Foods, is receiving unwanted attention from Continental Finance, which is attempting a hostile takeover. Potentially riding to the rescue is the "white knight" company United Brands, and leverage buy-out (LBO) firm Lanza.

The 33 full-time MBA students from Cass who have chosen the M and A elective this year are divided into four teams, and are trying to pilot their way through the turbulent corporate waters, with the objective of negotiating an outcome that is most advantageous to their firm.

The exercise has been devised by Scott Moeller, head of executive education at Cass, and formerly head of M and A at Deutsche Bank and Morgan Stanley.

"I've probably done this 50 times and never had the same result," he says, in between assuming a range of pretend identities crucial to the simulation. He is, for example, the stockmarket, the bank, the regulator and a financial news agency putting out running stories based on the progress of the simulated takeover.

"The exercise is great for introducing topics such as, why do share prices go up and down in the middle of a takeover battle?" says Moeller. It also drives home the importance of concentrating on central business objectives, hones negotiating skills and underlines the intricate workings of an M- and-A deal.

"Past students of mine come back to me three years after leaving and say they always remember the role they played in this game," he says. By 2.30pm, the teams have absorbed their starting positions and the corporate manoeuvring is gaining momentum.

In one meeting room, littered with half-drunk coffee cups and empty sandwich packets, the team from Global Foods pore over laptops and discuss a strategy to defend themselves from a hostile takeover.

"Look at the share price change. Someone's buying our shares, which is unusual if they're making a bid," one student notes with a frown.

As I walk down the corridor towards another team, Richard Odumodo, former Cass MBA student and now a lecturer, chuckles to himself, and confides to me that the Global Foods team's reading of the market is wrong.

Meanwhile, at United Brands, the discussion revolves around a move to split up the divisions of Global, into the chemicals and food components. Perhaps a deal could be done with the LBO firm, Lanza?

"They'll take the chemicals, and we'll take the food," suggests the student playing the role of negotiator. "But we have to find out the value of the chemical business."

Little do they know, though, that a few paces down the carpeted corridor, Lanza's team leader is just sitting down with the board of Continental Finance, to try to carve out a deal which would scupper United Brands' plans.

The Lanza boss's Gap T-shirt and loose-fitting chinos remind the onlooker that this is a student exercise, but the share price spreadsheet projected on the wall behind him looks genuine enough. And the way the conversation goes adds to the authenticity.

"What assurance can you give us that you are serious about doing a deal with us?" Continental's boss enquires. "And what would you do with your business afterwards?" asks another.

The Gap T-shirt doesn't welcome the intrusive questions. Somehow the atmosphere in the room goes sour and the negotiations trail away without a deal. Back at Lanza's base, the marker pen arrows and lines on a flip chart resemble an enormous spider's web.

The team are briefed by their leader following the inconclusive talks with Continental, and resolve to open talks with one of the other parties.

And so, for the next couple of hours, strategies are honed, shares are bought and sold, massive bank loans are negotiated and attempts are made to feed favourable, but misleading, stories to the business press. Once or twice, tempers become a little frayed.

At a pre-arranged time, the final whistle is blown and the students gather in the lecture theatre for a de-brief with Moeller. For the record, this time Global Foods has managed to stave off the hostile takeover, but Moeller is more interested in teasing out the important lessons: "How are you paying for that? What business are you in? Did you announce that offer in public?"

Around the room, brows furrow, and the debate rages as each team puts up a passionate defence for its actions. This is practical learning at its best.

Afterwards, the students enthuse volubly about the experience. "It was a very fast-paced, exciting environment and the best part was learning to work under pressure," says Betsy Stewart, a US finance company employee before she began her MBA.

Francesco Mosca, who worked for Kelloggs in Manchester, is in no doubt about the day's key element.

"For me the clear lesson is that negotiating is the most important thing in an M-and-A deal. It's the human factor."

And Peter Webb, who came to Cass from an account manager's job at Logica CMG, reaches a similar conclusion.

"I learnt how confusing the whole process can be. Controlling information flow and negotiating is key."

And as the room empties, the impression settles that the day has been as close to a real M-and-A experience as it's possible to get inside a business school.