This technical note outlines the effect of Section 197 of the Internal Revenue Code on goodwill and other intangibles purchased in an acquisition. It compares the treatment of goodwill and other purchased intangibles for tax and financial accounting purposes. The note also briefly discusses the allocation of the purchase price in different taxable asset deal structures, the residual method, contingent payments and recapture taxes. These tax laws affect current and future cash flows to the acquirer and target shareholders and as a result can affect the price and optimal structure of a deal.
This case describes a consulting firm that is assisting a pharmaceutical company as it faces a strategic question regarding how to determine the size of its sales force. An Excel file containing two of the case exhibits is included and is available by contacting [email protected]. A related Technical Note entitled "A Note on Sizing the Sales Force" (UVA-M-0746) is available that describes several approaches one could employ to size a sales force; it addresses the advantages of each approach as well as the weaknesses.
Kiran Majumdar-Shaw, the CEO of Biocon has to make product launch timing, pricing, channel, and communications mix decisions relating to the launch of BioMAb, a new cancer drug in India.
Introduces students to simple forms and solution techniques for real options found in corporate settings. Revised versions of problems appearing in an older problem set (293-095). The basic differences are that the new set is shorter, but also a bit more demanding.
The corporate manager of vehicle planning at Nissan Canada Inc. had been asked by the director of vehicle ordering for Nissan North America (NNA), to review the proposed vehicle ordering process as part of the new Integrated Customer Order Network (ICON). The ICON project would change Nissan's North American vehicle ordering process from a 'make-to-stock' into a 'make-to-order' environment which called for a significant process transformation for Nissan's operations in North America and Japan. The corporate manager of vehicle planning was hoping that the new process would be exactly what the dealers were seeking in an effort to closer align production with customer demand. However, he needed to evaluate the new process from the perspective of all stakeholders to ensure that Nissan's business objectives could be met.
Examines technology, firm performance, and the stock market during the 1929 Great Crash and the Great Depression of the 1930s. The 1920s was an extraordinary period of technological progress marked by a strong run-up in stock market prices. Firms invested heavily in R&D and human capital, while mass production and scientific management techniques were extensively adopted. Narrates the history of the 1920s and 1930s through the life of Irving Fisher, a prominent academic, investor, technologist, and market commentator who claimed that innovation was driving equity prices higher. Analyzes why Fisher believed that the high level of the stock market was justified, and his explanations for why the stock market crashed. Further explores the 1930s, marked by mass unemployment and social distress on the one hand, and entrepreneurship and innovation on the other. Fisher's views provide a conduit for examining the dynamics of stock market behavior and economic performance during one of the most significant periods in U.S. economic and financial history.
As Hurricane Katrina roared towards the Louisiana and Mississippi coasts on August 28, 2005, the public sector-ranging from local law enforcement to the Federal Emergency Management Agency-feverishly prepared for what was expected to be a devastating hit. At the same time, the private sector was undergoing its own exhaustive preparations. At its Bentonville, Arkansas, headquarters, giant retailer Wal-Mart had already launched a comprehensive emergency response that included stocking stores in the storm zone with special merchandise; stationing teams to evaluate stores as soon as the hurricane passed; and gathering representatives of all major functional areas in a centralized emergency operations center in order to find displaced employees, re-open stores, and help stricken communities. After Hurricane Katrina caused catastrophic flooding that overwhelmed the government's response, though, Wal-Mart found itself playing a larger role than it had anticipated. The following chaotic weeks raised important questions about whether the public sector could take full advantage of the retailer's strengths and capabilities, and whether it was ready to accept a larger role for Wal-Mart and other companies in responding to national emergencies. The case should be useful for those interested in emergency preparedness; inter-agency collaborations; public-private partnerships; and organizational behavior. Revised September 2008. HKS Case Number 1876.0
As Hurricane Katrina roared towards the Louisiana and Mississippi coasts on August 28, 2005, the public sector-ranging from local law enforcement to the Federal Emergency Management Agency-feverishly prepared for what was expected to be a devastating hit. At the same time, the private sector was undergoing its own exhaustive preparations. At its Bentonville, Arkansas, headquarters, giant retailer Wal-Mart had already launched a comprehensive emergency response that included stocking stores in the storm zone with special merchandise; stationing teams to evaluate stores as soon as the hurricane passed; and gathering representatives of all major functional areas in a centralized emergency operations center in order to find displaced employees, re-open stores, and help stricken communities. After Hurricane Katrina caused catastrophic flooding that overwhelmed the government's response, though, Wal-Mart found itself playing a larger role than it had anticipated. The following chaotic weeks raised important questions about whether the public sector could take full advantage of the retailer's strengths and capabilities, and whether it was ready to accept a larger role for Wal-Mart and other companies in responding to national emergencies. The case should be useful for those interested in emergency preparedness; inter-agency collaborations; public-private partnerships; and organizational behavior. Revised September 2008. HKS Case Number 1876.1
This case examines the interpretation of political polls. It discusses margin of error, confidence intervals and the relationship between sample size and margin of error. An Excel spreadsheet is included, Ivey product # 7B07E016, to help students understand the concepts.
Describes Texas Pacific Group's purchase and operation of J. Crew, the catalog and specialty clothing retailer. Highlights the issues involved in financing such a transaction, and then focuses on the operational challenges of turning around the business, and of TPG's intensive involvement in the running of the business. Details the improvements in the business, and then the retrenchment, leaving the business facing a significant debt payment coming due. TPG must decide whether to sell the business and get out "whole," or whether it can develop and execute a more successful strategy going forward.
Demonstrates the accelerating impact of leverage on returns under differing scenarios of property performance. The performance scenarios represent two points in time: the inception of the investment and the liquidation.
On September 20, 2000, Jonathan Weill, a Wall Street Journal reporter in Dallas, Texas, published a piece questioning the profitability and accounting of Enron Corporation. He based his article on a study of Enron's financial statements and conversations with staff at the Financial Accounting Standards' Board (FASB), accounting professors, financial analysts, and others. "It took me a while to figure out everything I needed to... It probably took a good month or so. There was a lot of noise in the financial statements." His piece was read by James Chanos, founder and president of Kynikos Associates, a firm that specialized in short-selling. How did Weill and Chanos figure Enron out when so many others were pushing up the stock price? How did they know to do that kind of analysis? Only the answer is simple: through study, application, and more application. You cannot develop financial analysis expertise overnight. Our objective in this document, however, is to present a very basic structure for financial analysis that will help move you toward that goal. We focus on what to look for in the financial statements, how to do basic ratio analysis, what financial forecasting entails, and how analysts use financial statement data in valuation. We intentionally focus on the mechanistic nature of financial analysis because these tools are fundamental building blocks common to the analysis of most firms. Without understanding this basic structure the unique issues facing a firm would be difficult to interpret.
Describes a prospective "venture debt" loan to a new venture from the perspective of Patrick Lee, a principal at Pinnacle Ventures. Forces students to grapple with the nature of financial risk in the start-up firm and assess the prospective risks and returns to a lender to such a firm. To reach a perspective on these issues, students need to assess the existing pro forma cash flows of the venture backed firm, overlay the cash flow implications of a venture debt loan, and assess how much additional "runway" (months till cash runs out) the venture debt will provide. Students must also look at the prospective returns to the venture debt firm from the warrants and the option to invest in follow-on financings that is provided to Pinnacle as part of the loan. Thus, they must look at risk and return from the prospective of both parties. Also provides information on the returns to venture capital, venture debt, and other forms of private equity, and asks students to address the issue of what the risk and return in these various private equity asset classes has been and is likely to be.
Shopster.com is a Calgary-based e-business company whose business is to assist other individuals or companies in setting up their own retail transactional websites. Shopster differs significantly from ordinary website developers in that retailers are able to select from a huge inventory of salable products, through Shopster's network of goods providers. Shopster also provides software tools, and expertise, to allow anyone wishing to create an online retail store to do so quickly and easily. Shopster's business has done well to date, but there are plenty of operational challenges ahead. As well, the principals would like to "raise the bar" substantially, to something they refer to as "Shopster 2.0," the specifics of which are still at a formative stage. The Shopster case provides an interesting example of a small but rapidly growing Canadian company with an innovative business model and big dreams for the future.
Shopster.com is a Calgary-based e-business company whose business is to assist other individuals or companies in setting up their own retail transactional websites. Shopster differs significantly from ordinary website developers in that retailers are able to select from a huge inventory of saleable products, through Shopster's network of goods providers. Shopster also provides software tools, and expertise, to allow anyone wishing to create an online retail store to do so quickly and easily. Shopster's business has done well to date, but there are plenty of operational challenges ahead. As well, the principals would like to raise the bar substantially, to something they refer to as Shopster 2.0, the specifics of which are still at a formative stage. The Shopster case provides an interesting example of a small but rapidly growing Canadian company with an innovative business model and big dreams for the future.
The director and co-founder of Honey Care Africa (Honey Care) looks back over the six years of operations and describes the original business model and several sequential changes based on feedback from rural communities, partner organizations, and learning by doing through field operations. Increasing international recognition highlights the potential impact of the model on inspiring sustainable grassroots ventures in the agriculture sector in Kenya. For Tanzania and other developing countries, he ponders the potential opportunities and challenges in replicating the Honey Care model elsewhere. The case also tackles alternative routes for scaling up the model in East Africa. Students are presented with several specific challenges which illustrate the growing tension between Honey Care's original commitment to the farmers and its prospects for international take-off, and are asked to propose alternative model reconfigurations to resolve this tension.
Shane Immelman, founding CEO of Lapdesk (South Africa), is facing several acute problems: a conflict between his director of marketing and his director of field operations; a dramatic increase in prices by a key supplier; and a major strategic alliance that does not seem to be moving forward. Lapdesk is a for profit social enterprise (FOPSE) dedicated to eradicating the shortage of classroom desks in public schools. What should Immelman do? Will Lapdesk achieve its mission?