In 2013, Brigitte Baumann, founder of the Pan-European angel investing provider Go Beyond Investing, reflected on the evolution of her venture and the way forward. Her company, which offered deal flow and training to novice and experienced angel investors and ran investor groups in several European countries, had reached a critical size, and Baumann needed to make a strategic decision to ensure its future growth in an industry that was undergoing rapid competitive and regulatory change. Her options required a decision on whether to keep her venture independent, and use a financing round to grow and scale it to a European leader in early stage investing, or whether to cash out and/or have it evolve more quickly through a partnership or sale. Possibilities included a future sale to a private bank that was looking for ways to expand their investment offerings for high net worth individuals, or joining forces with one of the emerging crowdfunding networks that targeted small investors. All of these options would require adjustments to Go Beyond Investing's strategy, capabilities, financing, and organizational structure.
Established in 2004, Facebook had shown stupendous growth. However, faced with the evolving mobile communication industry and increasing competition, the company was on the lookout to increase its user base by acquiring WhatsApp. Was it the right decision for Facebook to acquire WhatsApp — and at the steep price of $19 billion? From WhatsApp’s perspective, the company’s founder wanted to continue with his vision of connecting people, irrespective of the decision involving Facebook. Should WhatsApp sell its assets to Facebook or should it insist on an equity alliance instead?
The H&M case is set immediately after the Rana Plaza collapse in Bangladesh. The case explores questions of who is to blame and how it should be addressed. There is no guarantee that H&M garment manufacturing had not been subcontracted to one of the factories in Rana Plaza, and Helena Helmersson, head of sustainability at H&M, must meet with the CEO, Karl-Johan Persson, to discuss how the company will respond and devise a plan to face the media coverage and public scrutiny of the apparel industry that is sure to follow. This case was written under the supervision of Andrew Hoffman at the University of Michigan by graduate students Marianna Kerppola, Ryan Moody, Likangjin Zheng, and Amaryllia Liu.
The diamond framework can be used to develop strategies in multibusiness enterprises at all organizational levels and across markets or products. This note demonstrates how the framework yields insights that managers and executives need in order to make critical strategic decisions. The power of a single integrated approach lies in its transformative ability to unite a firm with one template based on a common language and shared lexicon.
In January 2012, Ellen Kullman, CEO and chairman of DuPont, must decide whether to retain or sell the company's Performance Coatings (DPC) division. This is an introductory case on valuing a leveraged buyout. The case focuses on a publicly listed corporation's decision to divest a large division and asks students to compare the division's value if it remains under DuPont's control or is sold to an outside party. The transaction size of approximately $4 billion is too large for potential strategic buyers in the industry, making private equity (PE) firms the most likely bidders. The case provides a base-case adjusted present value (APV) model of DPC as a stand-alone company and gives students specific assignments to adjust it to reflect the division's potential value under PE ownership (e.g., EBITDA growth, multiple arbitrage, and increased leverage). The case is designed to illustrate and discuss the differences between a public company's valuation based on unlevered free cash flows and a PE sponsor's valuation based on residual (levered) cash flows. This case has been successfully taught in a second-year elective course covering entrepreneurial finance and private equity and in an advanced undergraduate course on corporate finance. It is appropriate for use in classes on private equity, advanced corporate finance, or deal valuation.
This technical note, which is based on an earlier note (UVA-F-0910), provides a student primer of firm cost of capital from a conceptual and application perspective. The note provides student intuition on the traditional theory of cost of debt, cost of equity, and weighted-average cost of capital. Moreover, it provides detail on the common approaches to estimating the cost of capital. Specific examples are provided. The note is updated with actual data through 2012.
In 2013, Aldi-the world's 8th largest retailer-planned to accelerate its US expansion. Aldi was a German-based hard discounter that sold a limited assortment of private-label groceries and household items in barebones stores. Despite its presence with 1200 stores in 32 states, Aldi was still relatively unknown in the US. But it was often cited as one of the reasons for Walmart's exit from Germany. Could it compete with Walmart in the US, Walmart's home market?
Diageo, the world's leading premium drinks business, had a long history in Africa starting from its beer brand, Guinness, first exported to Sierra Leone in 1827. By 2013, 13% of Diageo's global revenues were from Africa, up from 9% in 2007. Diageo Africa President Nick Blazquez was considering how to seize the opportunities presented by rising populations and incomes while navigating increased competition and the unique challenges presented by frontier markets. The case describes Diageo's innovation process and two recent product launches developed specially for Africa. It also discusses government relations and the need to develop local production and raw material supply chains.
Zeta Mining, one of the world's largest producers of metallurgical coal, operates a number of mines in the Bowen Basin, Central Queensland, Australia. The company has invested about AU$8 billion in the region. Before extracting the coal, the overburden of dirt, rock and other geological waste has to be removed, and this is usually done by draglines, which are imported from the United States and constructed on site, requiring a significant investment in time and money. In 2012, Zeta's chief financial officer tasked the Bowen Basin project evaluation director to decide whether to "walk" one of the 3,400-tonne draglines six kilometres to another mine or to employ external contractors to remove that mine's overburden. To do so, the director was required to perform an incremental comparison analysis using net present value methodology. The CFO will then use the analysis and any other relevant factors in making a final decision.
(With SaaS, vendors stored a client's data in an external server or in the cloud, and maintained the software and relevant hardware.) Transitioning to SaaS required the €114 million company simultaneously to transform its strategy, business model, technology and culture; and the change process was bumpy. SaaS customers paid as they used services, rather than upfront as they did with the licensed software and installation business; that difference had an immediate negative impact on Basware's revenue stream. The company's new SaaS technology would be best in breed when it was complete, but it was taking longer than expected to be ready. Basware also needed to reorganize as a global organization, its sales people needed to be retrained or transitioned out, and its culture needed to adjust to match these rapid changes. At the same time, Basware's e-invoice operator business was booming. In 2013, there were an estimated 63 million transactions across the Basware Commerce Network, and the company expected to hit 150 million transactions by the end of 2015. Speed was the name of the game for Basware, as each transaction brought in money and because the network's size was Basware's competitive advantage. Although the software and e-invoicing businesses were two separate businesses, they were synergistic. The more customers moved from paper to e-invoicing, the more they would be able to use the full functionality of Basware's automated software solutions.
This case deals with a project to build a hybrid operating room for cardiac surgery at Montreal's Sainte-Justine University Hospital. The case is discussed from the perspective of change management and implementation processes at the personal and organizational levels. The change involved the learning of new practices with state-of-the-art equipment and the collaboration of two medical teams: surgical and cardiology. This initiative, suggested by a cardiologist in 2002, was finally completed in 2010 following several years of fundraising efforts and the departure of several stakeholders. The arrival of a new CEO in 2009 gave fresh impetus to the project. The leaders of the two teams managed the change to the best of their ability, and a Tactical committee was set up to plan activities and prepare the various actors for the change (managers, cardiologists, cardiac surgeons, anesthesiologists, nurses, technologists, etc.). This case study of a successful change reports the perspectives and perceptions of fourteen key actors, including doctors, nurses, managers, administrators, heads of sectors and other units, and the chief executive officer.
In 2012, the general manager at the Seoul location of a European manufacturing company faces an ethical dilemma involving bribery and “facilitation” payments. A key decision maker in a local construction company’s purchasing department has asked for a “facilitation” payment as a necessary condition for securing an order. If the expatriate manager decides to pay the money, he will secure an order that will lift his company to a new level of success for years to come. If he decides not to pay, the order and all the company has worked for over the last year will be lost. The expatriate manager must decide whether or not the payment would violate laws internationally, locally and in his home country. What are the real risks? Who can help him answer the many questions he has regarding this local practice?
SolarCity Corporation competed in the downstream segment of the U.S. solar energy industry. The company installed solar panels for residential and commercial customers, using a decentralized (off-the-grid) power generation and transmission model to compete with utility companies that used a centralized (grid-based) model. Solar energy was a renewable source (unlike fossil-based energy sources) and therefore scored highly on both environmental and sustainability factors. To overcome the high switching costs to customers, SolarCity marketed solar energy using a financing model in which the company owned the assets and the customer merely paid a monthly fee for the energy used. As a new player in a nascent industry, SolarCity had never been profitable. SolarCity’s co-founder and chief executive officer had to develop a plan to make the company profitable despite the fact that utility companies were fighting back politically and the government was set to reduce tax subsidies for solar assets in the near future.
In fall 2009, the new president and chief executive officer of PAR Springer-Miller Systems, based in Stowe, Vermont, is tasked with leading the most significant innovation effort the company has undertaken since its founding in 1984. The company is a leading provider of property management, point-of-sale and spa management systems for high-end hotels, resorts, spas and casinos worldwide, but its legacy products are based on outdated technology and subject to increasing customer complaints; at the same time, the global recession has negatively affected the high-end market. In his first year, the new president has made significant progress in restructuring the organization and shifting its culture to a more entrepreneurial one. He is ready to begin the development of an entirely new product but has to decide on strategy, in particular deciding on the best market on which to focus the new software product and then mapping out a plan to execute its development and launch. How can he elicit a radical innovation from a team of management and employees so culturally rooted in their past accomplishments and legacy products? Should he look for a technology partner and develop the new product in a different location? Can the legacy products be kept up and running long enough for the new product to generate sufficient sales that they can be retired? These are the issues that must be addressed or the company may well face a dire future.<br><br>See B Case 9B14C023.
In fall 2009, the new president and chief executive officer of PAR Springer-Miller Systems, based in Stowe, Vermont, is tasked with leading the most significant innovation effort the company has undertaken since its founding in 1984. The company is a leading provider of property management, point-of-sale and spa management systems for high-end hotels, resorts, spas and casinos worldwide, but its legacy products are based on outdated technology and subject to increasing customer complaints; at the same time, the global recession has negatively affected the high-end market. In his first year, the new president has made significant progress in restructuring the organization and shifting its culture to a more entrepreneurial one. He is ready to begin the development of an entirely new product but has to decide on strategy, in particular deciding on the best market on which to focus the new software product and then mapping out a plan to execute its development and launch. How can he elicit a radical innovation from a team of management and employees so culturally rooted in their past accomplishments and legacy products? Should he look for a technology partner and develop the new product in a different location? Can the legacy products be kept up and running long enough for the new product to generate sufficient sales that they can be retired? These are the issues that must be addressed or the company may well face a dire future.<br><br>See A Case 9B14C022.