Sink Or Float: An Oliver Wyman And Duke Royalty Investment Opportunity

In late 2016, an analyst at Oliver Wyman (OW), was contemplating the high stakes of her new project. European riverboat company Temarca Group (Temarca) had just approached Duke Royalty (Duke) seeking €9.0 million to expand its riverboat fleet at the time. The analyst had to consider the first potential investment for the newly-formed partnership. If a financing decision was made, Temarca would be one of the first investments in Duke’s portfolio. The analyst had to ensure this investment was aligned with Duke’s investment mandate, met the financial criteria, and delivered the targeted returns essential to please keystone investors. Similarly, she knew this deal would be highly scrutinized by the OW partners because Temarca would be OW’s first fully-financed deal with Duke. With all this in mind, the analyst's task was to make a preliminary recommendation to the chief executive officer of Duke and a founding partner of OW about the soundness of the opportunity. She had to decide whether Duke should invest in Temarca or pass on this opportunity.

This case is suitable for undergraduate and graduate programs as part of either a long-term investment or an alternative financing section of a course. The case includes a detailed investment calculation with the added complexity of royalty financing, so is not likely suitable as an introduction to that topic. After completion of this case, students will be able to<ul><li>understand the royalty financing segment of financial markets;</li><li>assess the risks and rewards of this type of financing;</li><li>develop comprehensive analytical skills including a complete business size-up; and</li><li>calculate free cash flows, internal rate of return, and net present value.</li><ul>

• long term investment, financial analysis, royalty financing