The case offers a great opportunity to engage in discussion about major theoretical issues, such as the debate about the benefits of effective governance for the competitiveness of firms vis-Ã -vis the negative effects of excessive regulation. At the practical level, the case opens a window on the efforts of progressive enterprises in adopting behaviors, and building and establishing processes conducive to their competitiveness. The case provides a platform for considering the strengthening of business competitiveness. It encourages reflection about competitiveness whatever the nature of the organization. The lessons drawn from this case, thus, could appeal to any company because they highlight the challenges and opportunities that the search for competitiveness brings.
Swiss German Tobacco plans to introduce a new tobacco brand in the Czech Republic. The company has been operating in the country until 2007, when a currency crisis has taken the country out of a euro peg, and into a dollarization of the economy. The new brand is to be labeled "Matrix", as a glamour product targeted to a sophisticated segment, and competing with already established Kent Nanotek, manufactured by British American Tobacco. The question of whether to introduce the brand or not boils down to a valuation exercise, where the major inputs are: the expected demand for the product, driven by population growth; the prospects for tobacco in the country; and technical requirements in production and distribution. Participants are confronted sequentially with these challenges. Learning objectives: This is acapital budgeting and investment selection case, a comprehensive exercise of a Tobacco firm that designs a new brand, which is to be introduced in the market. It is a good illustration of the Free Cash Flow technique, used here for investment appraisal throughout a series of seven challenges.
The A case, Financial Strategy at BAA PLC, discusses the structure of the target company and specifically its capital structure. BAA's asset base was very stable, low risk and very well protected from competition. The firm had been generating substantial cash flows over the past few years and had completed some acquisitions at home and abroad. Yet, it was underleveraged, not only according to the simple capital structure theory but also compared to its peers. Therefore, Grupo Ferrovial (and Goldman Sachs, which was competing to acquire BAA) found a great value opportunity by leveraging up BAA's assets. The B case, Ferrovial Conquers the UK, guides us through the acquisition process and in particular through the financing aspects of the deal. The BAA-Ferrovial Acquisition received the Finance Package of the Year Award by Acquisitions Monthly Magazine. The deal was the largest infrastructure acquisition financing ever undertaken in the debt markets; it contained the largest second lien tranche ever, which maximized liquidity, tapping interest among both banks and fund investors; and had a groundbreaking structure designed potentially to survive a whole-business securitization. Learning objectives: The case can be used with a broad range of audiences and provides opportunities to discuss the basics of capital structure and financial policy; to describe the functioning of debt markets; to follow a complex acquisition that went from hostile to friendly; to discuss syndication in the credit markets; and to analyze the challenges that CFOs face in order to balance the threat of acquisitions with the need for a conservative capital structure. It can be used in a basic finance course to introduce capital structure and debt financing. It can also be used with finance teams and with executives in general as a way to discuss the complex terms of the transaction.
The A case, Financial Strategy at BAA PLC, discusses the structure of the target company and specifically its capital structure. BAA's asset base was very stable, low risk and very well protected from competition. The firm had been generating substantial cash flows over the past few years and had completed some acquisitions at home and abroad. Yet, it was underleveraged, not only according to the simple capital structure theory but also compared to its peers. Therefore, Grupo Ferrovial (and Goldman Sachs, which was competing to acquire BAA) found a great value opportunity by leveraging up BAA's assets. The B case, Ferrovial Conquers the UK, guides us through the acquisition process and in particular through the financing aspects of the deal. The BAA-Ferrovial Acquisition received the Finance Package of the Year Award by Acquisitions Monthly Magazine. The deal was the largest infrastructure acquisition financing ever undertaken in the debt markets; it contained the largest second lien tranche ever, which maximized liquidity, tapping interest among both banks and fund investors; and had a groundbreaking structure designed potentially to survive a whole-business securitization. Learning objectives: The case can be used with a broad range of audiences and provides opportunities to discuss the basics of capital structure and financial policy; to describe the functioning of debt markets; to follow a complex acquisition that went from hostile to friendly; to discuss syndication in the credit markets; and to analyze the challenges that CFOs face in order to balance the threat of acquisitions with the need for a conservative capital structure. It can be used in a basic finance course to introduce capital structure and debt financing. It can also be used with finance teams and with executives in general as a way to discuss the complex terms of the transaction.