In the spring of 2008, the recession had decimated the company's core business, construction equipment rental. The economic downturn resulted in a significant decrease in North American construction and industrial activities and had adversely affected the company's revenues and operating result. The stock of the company quickly fell from the mid-$30 range in late 2007 to $3 in March 2009. In addition, two of the company's former chief financial officers had been charged with securities fraud and other violations, by both the U.S. Attorney's office and the SEC. The Board was faced with the resignation of the founder and chairman, management succession issues, the failed merger with Cerberus, and the lawsuit in Delaware. The Board was responsible for overseeing the change in a number of senior management and board positions which became increasingly difficult due to the turmoil and poor performance of the company. Recruiting and retaining talent in senior management and the board was central to the success of the company, which relied on their people for strong performance. In addition the company's total indebtedness was approximately $3.3 billion, including $146 million of subordinated convertible debenture. The company's substantial indebtedness had the potential to have adverse consequences in a number of ways, including: increase their vulnerability to adverse economic, industry or competitive developments; require the company to devote a substantial portion of their cash flow to debt service, reduce the funds available for other purposes; limit their ability to obtain additional financing; and decrease their profitability or cash flow. And the company was still dealing with multiple purported class action and derivative lawsuits that had been filed against it. It was during this time the board started looking for candidates both for the CEO and Chairman positions.
The publisher Random House, a fully owned subsidiary of the German family company Bertelsmann SE & Co. KgaA, faces significant changes in its markets and internal structure. While printed books have been the company’s core competence from its earliest years, with the advent of the Internet, customers, especially in the West, are beginning to prefer electronic books. Will printed books be completely replaced by digital ones, or will e-books remain a niche market? How will this development affect production, distribution and marketing? Will Random House be able to compete for authors and sales with such online e-book giants as Amazon? The imminent merger with the U.K. publishing house Penguin also provides an opportunity and incentive to expand Random House’s operations into China as part of the internationalization strategy of the parent company. A post-merger integration plan must be established since the two publishers’ regional presences and product offerings are in part complementary. How can the new Penguin Random House strengthen its position as the world’s biggest and most successful publisher?
The publisher Random House, a fully owned subsidiary of the German family company Bertelsmann SE & Co. KgaA, faces significant changes in its markets and internal structure. While printed books have been the company's core competence from its earliest years, with the advent of the Internet, customers, especially in the West, are beginning to prefer electronic books. Will printed books be completely replaced by digital ones, or will e-books remain a niche market? How will this development affect production, distribution and marketing? Will Random House be able to compete for authors and sales with such online e-book giants as Amazon? The imminent merger with the U.K. publishing house Penguin also provides an opportunity and incentive to expand Random House's operations into China as part of the internationalization strategy of the parent company. A post-merger integration plan must be established since the two publishers' regional presences and product offerings are in part complementary. How can the new Penguin Random House strengthen its position as the world's biggest and most successful publisher?
In early 2010, Naval Ravikant and Babak Nivi posted a list of angel investors on the Venture Hacks blog as a resource for founders looking for funding prior to seeking venture capital. The list quickly evolved into AngelList, a separate matchmaking platform for founders and investors to make early stage fundraising more efficient. By June 2013, AngelList had garnered substantial media attention, and was used by many high profile angel investors and venture capitalists. It had approximately 100,000 startups and 18,000 accredited investors. Since the site was launched, almost 40 startups on AngelList had been acquired, and over 2,000 startups had been funded. For most entrepreneurs, posting a profile on AngelList had become as commonplace as setting up a personal profile on Facebook or LinkedIn. Most recently, the site added Invest Online, a new product that in partnership with SecondMarket, allowed accredited investors to make small investments-as low as $1,000-in startups at the same terms as larger investors.</p><p>While the co-founders were proud of AngelList's growth, as of June 2013, they were not charging for its use and had not yet determined its business model. Ravikant and Nivi wondered if they should reconsider and have AngelList apply for broker dealer status so it could charge transaction fees, but they were reluctant to enter what they considered a regulatory minefield. The recently passed JOBS Act was expected to relax constraints around crowdfunding, and Nivi and Ravikant knew that would be a logical extension for AngelList as well. Finally, they wondered if they should avoid any potential regulatory issues altogether and instead focus on generating revenue primarily from recruiting and other ancillary services.
India’s real estate boom led to the built-in appliances industry’s biggest opportunity. In 2010 and 2011, a total of 533,954 residential units were launched in seven top cities: Mumbai, National Capital Region, Pune, Kolkata, Bengaluru, Chennai and Hyderabad. As the market evolved and demand increased, investments and improvements in infrastructure, software, education, work force, installation, after-sales service, logistics were guaranteed to occur. This was expected to initiate a cycle of profitable growth. Whirlpool was already an established player in the home appliances segment. Given the improving industry described above, should Whirlpool tap this emerging market? If so, what might be its strategic objectives and positioning strategies for dealing with the competition and appealing to its prospective customers?
India's real estate boom led to the built-in appliances industry's biggest opportunity. In 2010 and 2011, a total of 533,954 residential units were launched in seven top cities: Mumbai, National Capital Region, Pune, Kolkata, Bengaluru, Chennai and Hyderabad. As the market evolved and demand increased, investments and improvements in infrastructure, software, education, work force, installation, after-sales service, logistics were guaranteed to occur. This was expected to initiate a cycle of profitable growth. Whirlpool was already an established player in the home appliances segment. Given the improving industry described above, should Whirlpool tap this emerging market? If so, what might be its strategic objectives and positioning strategies for dealing with the competition and appealing to its prospective customers?
High-yield debt is an important provider of financing for a broad range of corporate purposes. This note discusses the basic features of high-yield debt, some of its advantages and disadvantages, and the market in which it is primarily issued in the United States: the Rule 144A market. Because the market serves more speculative and volatile companies, the characteristics of the debt differ in pricing, availability, and risk compared with investment-grade debt. The note discusses and provides data to illuminate each of these differences.
This exercise leads students through the essential logic linking capital structure and firm value. It begins with a nontax benchmark, then proceeds through valuations with tax deductibility based on (1) a discount rate with tax effects built in (discount free cash flow at the WACC), (2) the valuation of specific claims (value equity cash flows and debt cash flows separately), and (3) the valuation of types of cash flow (value assets and interest tax shields separately). These concepts are linked to stock price effects around recapitalizations, and financial risk (leverage effects on CAPM betas) is also introduced and illustrated.
The CEO of SafeBlend Technologies must set a price for the company's environmentally friendly fracturing fluid additive. The firm is negotiating a new contract with its biggest client, Bristol Natural Gas. For the past two years, SafeBlend has been the sole provider of additives to Bristol due to aggressive negotiation and limited competition. New competitors are entering the market, and the CEO believes one competitor is prepared to offer Bristol a chemical-free additive for 50% less per gallon than SafeBlend. Anticipating lower bids from competitors, he considers reducing the price in the new contract to maintain the relationship with Bristol-despite the impact on revenue. However, the competition may not be able to supply enough additive to meet all of Bristol's needs, so he also considers the impact of setting a more competitive and profitable price that assumes losing only a portion of Bristol's business.
This case analyzes the internationalization process of a Brazilian emerging multinational Artecola, a leader in manufacturing adhesives. It examines the different acquisitions of this medium-size family business in its natural market - Argentina and thenother Latin American countries. As the company moves from exporting to establishing manufacturing plants, it faces new challenges in order to sustain its growth: how to acquire and retain talent and financial resources.
After a successful career as Chairman and CEO of Paris-based luxury food company, Fauchon, Laurent Adamowicz, sought to reduce obesity and improve health outcomes. Adamowicz created a mobile application to provide consumers with more accessible and interpretable knowledge about the food they were eating so they could make better decisions. Despite Adamowicz's focus on promoting healthful and informed eating habits, many choices still lay ahead of him in deciding how to develop a platform and database, the type of business model that would best support his goals, and the types of collaboration and marketing techniques that would get his idea off the ground. Since 2010, Laurent Adamowicz evolved his concept for a mechanism that acted as a "nutritionist in your pocket" into Bon'App, a fully formed nutrition database and nutritional educational platform. After multiple iterations of the app design and revenue model, Bon'App began to see encouraging results with an increased user base and usage. Adamowicz's venture was accepted into a prominent Boston-based accelerator, attracted outside capital, added team members and attracted its first paying corporate client. Despite the progress made Adamowicz knew that his start-up remained in a fragile state. He wondered if he would be able to maintain the flexibility needed to capitalize on new opportunities while staying true to his mission to create a new standard for nutritional information.
In July 2012, retired United States Army Major General Gale Pollock created Elevivo, a venture that worked on developing a comprehensive disease management software system to support the growing number of visually impaired individuals by providing them with tailored information for how to create and sustain a high quality of life despite vision loss. As a first time entrepreneur, Pollock was continuously frustrated with the slow pace of process. She also faced a number of challenges, including personal setbacks, financing concerns, large institutional deficiencies within the existing medical infrastructure, and a need to shift her business model. Pollock had an unwavering commitment to the development and adoption of the system.
David Weinstein, a lawyer and former Chief Administrative Officer of mutual fund giant Fidelity Investments, launched Write the World, a proprietary online platform that included a writing curriculum, essay prompts in distinct subject matter, and access to expert reviewers. By July 2013, Weinstein had completed his first writing competition in partnership with a school, where students submitted essays through Write the World. While Weinstein was eager to host future competitions, he also considered a number of other models to expand the program.
In 2011, Junko Yoda with Pam McCambridge launched CLinked, a venture aimed to reduce human trafficking of women and children for sexual exploitation. Since incorporation, they launched several different pilot programs in partnership with local non-governmental organizations (NGOs) in Lampung, Indonesia where they also encountered a number of challenges ranging from a lack of trust within the local community to diminishing financial resources. Yoda struggled with the best approach to the large and complex issue, but started to gravitate towards developing replicable programs using art that positively impacted a small number of victims in high-risk communities. In 2013, Yoda wondered how she would grow CLinked and ensure its future.
Antoine Leboyer (HBS '92) acquired the Swiss-based software company GSX in February 2008. He managed through the recession of 2008-2009, dealt with a tumultuous separation from the founder/owner, rebuilt the management team, and upgraded the company's software development. By mid-2012 Leboyer believed GSX was positioned to invest in product development. His investment partner, however, wanted the company to focus on increasing profitability and cash flows.
Jade Magnet was India's largest creative crowdsourcing platform. It had grown from an entrepreneurship project idea of two MBA students to one that had completed more than 700 projects for 200 brands through 3,000 providers that offered a range of creative services. As 2011 was coming to a close, the founders were preparing for a meeting with their mentor and angel investor to discuss a number of issues including whether to grow the business by expanding domestically in India and/or expanding internationally into the Middle East. A decision to enter the Middle East would raise further questions concerning market knowledge, competitors, external funding sources, joint ventures and branding.
Jade Magnet was India’s largest creative crowdsourcing platform. It had grown from an entrepreneurship project idea of two MBA students to one that had completed more than 700 projects for 200 brands through 3,000 providers that offered a range of creative services. As 2011 was coming to a close, the founders were preparing for a meeting with their mentor and angel investor to discuss a number of issues including whether to grow the business by expanding domestically in India and/or expanding internationally into the Middle East. A decision to enter the Middle East would raise further questions concerning market knowledge, competitors, external funding sources, joint ventures and branding.