Honeywell was the first to introduce an integrated risk management program that combined traditionally insured risks with other risks in an insurance contract. This case identifies the benefits of integrating risks and shows how such an approach might be valuable.
In 1997, Kmart received an offer from retail buyout specialists Leonard Green & Partners for the purchase of its ailing 162-store home improvement chain, Builders Square. Green's offer included a $10 million cash payment, a warrant to purchase a 28% stake in the new entity in the future, and the assumption of approximately $1.5 billion in noncancelable Builders Square lease obligations. Kmart would remain contingently liable for the lease payments if the new entity were to fail. In the midst of the fiercely competitive home improvement retail industry, the questions posed include (1) what is the value of the Builders Square subsidiary?,(2) is the Green offer a good deal for Kmart?,and (3) should Kmart accept the offer or hold out for a higher offer or more offers?
Describes a proposed buyout transaction of Autodistribution, an entrepreneurial firm that is the leading car-parts distributor in France. The deal became feasible because of a failed takeover battle for Autodistribution's parent company. Private equity investor Butler Capital Partners must make an investment decision within three weeks. Other private equity firms compete with Butler for the deal. Butler must assess the potential for margin improvement and expansion within France and to other European countries. Furthermore, since the price for the deal is set, Butler must focus on finding an advantageous structure for all parties to secure the deal.
Introduces students to products and services that improve customers' online shopping experience. Also discusses the challenges of marketing new product concepts and finding funding for start-up ventures.
Black Entertainment Television, a leading cable programmer, is launching BET.com, an Internet portal targeted toward African-Americans. This case examines the challenges facing BET management as it defines its service offerings and target customer segments in a fast-moving, highly competitive environment. BET.com faces two decisions: 1) whether to bundle Internet access service with its ethnic portal; and 2) whether to strictly target African-Americans or also pursue the "urban market," a young (aged 15-24), cross-racial segment with distinctive tastes in music and fashion and part of the core audience for BET's cable programming.
The newly appointed CEO of an important high-technology company in Thailand must lead the company through a complicated debt restructuring. Due to the collapse of the Thai currency, the company's debt burden, like that of most Thai companies, has skyrocketed because it has borrowed heavily in U.S. dollars. The CEO, who is a U.S. citizen, must restructure the company under the recently revised, and largely untested, new Thai bankruptcy law. The new law allows troubled companies to reorganize their businesses following an approach that is similar, but not identical, to that practiced in the United States under Chapter 11 of the Bankruptcy Code.
In April 1999, the CEO of Repsol S.A., the large Spanish oil company, seeks to design the terms of an unsolicited tender offer to the shareholders of Argentina's largest oil company, YPF. The value to be paid per YPF share has been set. Remaining to be decided are: (a) form of payment, and (b) form of financing, if it is to be a cash deal. The task for the student is to sort through the advantages and disadvantages of three financing alternatives, using a framework such as FRICTO, and to make a recommendation. The objectives of this case are to: (1) illustrate the linkage between acquisition price, form of payment, and acquisition financing; (2) exercise analytical frameworks for comparing financing alternatives; (3) consider the important role of synergy expectations in designing financing. The case was prepared for use in an MBA elective on mergers and acquisitions, though could be easily adapted for teaching concepts of corporate financing.
For over a century, the international diamond market has been dominated by one of the most successful cartels on earth. Run by the legendary De Beers Corp., the cartel has managed to keep diamond prices increasing and to prevent the defection that dooms most other "orderly marketing arrangements." It has also managed to uphold one of the greatest marketing coups of history: convincing millions of customers that diamonds are actually rare and therefore highly prized. There is only one problem for the cartel. It is illegal in the United States (the world's largest market for gem diamonds) and has been under constant attack by the U.S. Justice Department. The case describes how De Beers has dealt with this problem in the past and how, in the late 1990s, changes in the African political situation and the world diamond market may suggest a new relationship with the U.S. government.
Delta Electronics, an automotive supplier, moves from delivering components to integrated systems of hardware and software. The company is facing the entry of Sun's Java and Microsoft's Windows CE into automotive electronics. Delta must decide which of the two possible standards to follow, and understand how the entry of these software platforms changes its own competitive position.
AOL investor Fred Grant was surprised and disappointed by the January 10, 2000 announcement of the AOL Time Warner merger. He had been fortunate enough to buy AOL at $40 in October 1999, just prior to the stock's rapid rise to $95 in mid-December. Although just days prior to the merger announcement the stock had settled to $73, by February 2, 2000, it had suffered another decline--to $57 per share. Although many observers spoke in glowing terms of the enormous synergies between Time Warner's premier content, advertising, and cable distribution channels and AOL's Internet brand, marketing savvy, and subscriber base, analysts predicted that growth for the merged company would be in the 15%-20% range, one-half of what Grant expected for his AOL holdings. Analysts also warned of the management and execution risks associated with the enormous and unprecedented combination of Internet and traditional media businesses. Finally, Grant was concerned about the implications of AOL Time Warner's use of the purchase rather than pooling method to account for the deal. Why wouldn't the company use pooling accounting, as had other companies for large stock deals such as NationsBank-BankAmerica and Travelers-Citicorp? Would goodwill's dampening effect on earnings hurt the market valuation of the new company? As Grant watched his AOL stock slide in the days following the merger announcement, he wondered whether he should sell his shares or, as some analysts suggested, use these new lows as a buying opportunity.
Located in one of the most troubled housing projects in Chicago, the job training program known as Project Match has an unusual approach to the task of bringing welfare recipients into the world of work. Rather than trying to broker a simple job placement, the program tries to encourage long-term change in the habits and living style of its hard-to-place population, in part by creating a social atmosphere in which work and ambition are valued. But because it receives funds from the Illinois Department of Public Aid, Project Match finds itself under pressure to produce job-placement results which demonstrate its success. The program itself urges authorities to find ways to quantify success besides simply finding someone a job-and places a premium on keeping track of those it's trying to help, long after a first job placement. The case highlights the challenges of social service program evaluation, as well as the problems an innovative agency has explaining itself to traditional bureaucracies with which it must deal. Revised May 2008. HKS 1076.3
This powerful first-person memoir-style case tells the story of a Western journalism teacher in post-war Cambodia where, amidst near-ubiquitous hardship and tragedy, she finds herself drawn to one individual tragedy-that of a woman she encounters in a hospital corridor. HKS Case Number 1561.0
This case traces why the $1 billion women's clothing retailer decided to attract younger customers, what went wrong, and the actions taken to recover. By the end of 1999, the company has reestablished itself and faces several growth opportunities and must decide on the best course of action.
Divisional management must decide whether to support a leveraged buyout by a private equity group and, if so, what percent of ownership should go to the various partners involved. The appropriateness of the financing structure and the value of the equity depend on the sustainability of the turnaround effected less than one year earlier.
Describes the creation and financing of Officenet, an office supply distributor in Argentina. The company serves the business-to-business market through a catalog (combined with phone orders) and also through an Internet-based catalog. Officenet is a pioneer in both catalog and Internet channels. While the company is possibly an acquisition target for one of the large U.S.-based office supply distributors, the entrepreneurs have to do a lot of work before they can realize an exit. They have to decide in which direction to grow the company and how to finance this growth. Specifically, a commercial paper program seems feasible in the near future, and the entrepreneurs have to decide on its size.