Set in 2016, Bata India versus Relaxo-Analyzing Performance compares the strategies and financial performance of two Indian footwear companies. Bata India had long been the market leader in footwear in India, but its leading market position was being challenged by Relaxo, a relatively young, upstart company. The case is framed from the perspective of an emerging markets financial analyst presented with the financial statements and operational data for both companies. The analyst has to compare and contrast the performance of the two companies based on financial ratios. Students can apply the traditional DuPont decomposition framework to drill down into the business model of the two companies. The case then allows students to use the modified (also known as additive or alternate) DuPont approach with the goal of systematically understanding the differences that arise from operating performance, leverage, and the effect of large cash holdings (in Bata). In doing so, students learn the components of the traditional and modified DuPont frameworks and how to analyze financial statements to better understand how firm performance can arise from operating and financing decisions. The traditional DuPont framework provides for a methodical evaluation of performance for each business, but it has its limits: it does not separate operating assets and liabilities from financing assets and liabilities. When the financing components are separated and reclassified using the modified DuPont framework, students can clearly observe the crucial role that financing activities vis-Ã -vis operating activities can have in amplifying performance.
In 2015, activist hedge fund Sachem Head Capital, led by founder Scott Ferguson, launched an activist campaign at (computer aided design) CAD software maker Autodesk. The activist campaign, waged mainly in private, was over Autodesk's lacklustre financial performance, with Ferguson thinking that Autodesk's performance could improve with better cost management. Facing a proxy contest, Autodesk added Ferguson and two others to its board in exchange for a standstill agreement. Following two years of significantly improved performance, Ferguson eventually stepped down when longtime Autodesk CEO Carl Bass announced his retirement in February 2017. The case illustrates how even companies with stellar products can underperform and how benchmarking and financial analysis can help identify drivers of firm performance. The case describes how boards and investors can engage to improve governance and ultimately achieve sustainable performance objectives.
In 2017, JANA Partners decided to launch an activist campaign at struggling supermarket chain Whole Foods Market. The company had struggled for the past several years, and JANA thought the presence of new directors could help turn around its operations, while Whole Foods resisted, adding new directors and announcing ambitious new financial targets. Facing continued pressure from JANA despite the new changes, Whole Foods accepted an acquisition offer from Amazon, ending the engagement with JANA.
London-based activist hedge fund PrimeStone Capital identifies a potential investment in Swiss security company Kaba. PrimeStone believes that the company is undervalued because it has been pushing back various financial targets, and thinks it can help by proposing a new, incentivized executive compensation plan. The company's performance improves, and PrimeStone needs to decide whether its presence can continue to add value or if it should exit the investment.
Noble Group, founded in 1986, was a large commodities trader based in Hong Kong and listed on the Singapore Stock Exchange. In 2012, Noble shifted its business strategy towards an asset-light model. Under this model, Noble did not own mines or farms to produce commodities but built commodity sourcing capacity by working with and investing in producers in exchange for purchase and marketing contracts. Noble also worked with customers to secure supply contracts. Noble had a portfolio of 12,000 commodity contracts by end of 2014. The contracts were measured at fair value. Iceberg Research, an anonymous blog, released a series of reports starting in February 2015 alleging that Noble was too aggressive in its fair value accounting for contracts and investments in producers. Iceberg did not accuse Noble of fraud, but suggested that Noble's profits and balance sheet were highly inflated and Noble was headed for disaster. Noble defended its accounting policies and hired PricewaterhouseCoopers (PwC) to provide an independent review of fair value measurement. PwC released a positive review of Noble's accounting. However, questions remained whether Noble's contracts and investments were overvalued. The case explores Noble's business and investigates whether questions about its accounting practices were in the past following the attestation by PwC.
The case discusses the events leading up to the massive data breach at Equifax, one of the three U.S. credit reporting companies, the organizational and governance issues that contributed to the breach, and the consequences of the breach. The case supplement provides details of how Equifax recovered from the breach and changes the company made. On September 7, 2017, Equifax announced that the personal information of over 140 million consumers had been stolen from its network in a catastrophic data breach, including people's Social Security numbers, driver's license numbers, email addresses, and credit card information. The announcement sparked a massive backlash, as consumers and public officials questioned how a company that managed sensitive personal information about over 800 million individuals could have such insufficient security measures. It came to light that Equifax had been aware of critical faults in its cybersecurity infrastructure, policies, and procedures for years but had failed to address them. Equifax's public response also received criticism. CEO Richard Smith and numerous other executives resigned, and Equifax was left facing dozens of lawsuits, government investigations, and the potential for new regulation.
Uber Technologies Inc., the popular ride-hailing company, entered 2017 having doubled its bookings in 2016 and achieving a valuation of nearly $70 billion, making it the largest venture capital-backed company in the world. Co-founder and CEO Travis Kalanick embodied the company, with a hard-charging attitude embedded in the company's workplace culture that allowed it to successfully take on the entrenched taxi industry. Uber looked to enjoy another year of global growth in 2017, until lawsuits and a cascading series of scandals surrounding that same workplace culture led a group of powerful investors to seek Kalanick's resignation to protect their investment. This case presents an overview of the growth of Uber, the impact of Kalanick, and the role that Uber's board of directors had in shaping the company's growth. It centers on the factors leading to Uber board members and investors to call for Kalanick's resignation, focusing on how board oversight can help shape company culture and how entrepreneurial boards deal with founder CEOs. It then deals with the events that happened in the aftermath of Kalanick's resignation, including the appointment of Dara Khosrowshahi as CEO and the changes, the lawsuit brought against Kalanick by venture capital firm Benchmark Capital, and the governance changes proposed at the end of September 2017.