Steven Rogers had always thought that someday he would like to own a business with one or both of his daughters. As his eldest daughter, Akilah, finished her final semester at Harvard Business School, she told Rogers that she would like to create with him a Chicago-based real estate venture that included buying, rehabbing and renting homes in the Englewood and South Shore neighborhoods of Chicago. Rogers quickly realized that his biggest challenge was how to equitably structure the ownership of the business. He gathered advice from family business experts and slowly began to build a plan that would benefit each member of his family. Meanwhile, Akilah assumed responsibilities associated with the business as she finished her final semester at HBS. The case ends with Rogers Family Enterprises owning its first three houses.
Jonathan Miller appeared in September 2009 on "Shark Tank", the ABC television reality show featuring entrepreneurs versus angel investors in a discussion of the business value proposition and to win a negotiation for an investment from one of the 4 Sharks. The company he founded, Element Bars, a maker of custom energy bars, needed investment capital. Prior to appearing on the show, Miller had considered several financing options available to entrepreneurs: loans and other debt capital and equity capital, each of which are evaluated in the case. Miller had a good feel for the different types of capital to use for this new venture, having started several ventures in the past and winning the Kellogg School of Management business plan competition, the Kellogg Cup, in 2008. The case includes Miller's decision to forego the investment offer he won on television, instead he pursued lower cost of capital equity.
Jim Reynolds Jr. founded Loop Capital in 1997 as an investment bank specializing in bond sales for municipalities. Ten years later, with thirteen offices and almost 100 employees, Loop Capital was a national company and had brokered more than $800 billion of underwritings in equity, tax-exempt, and taxable fixed income markets. In the process of building its municipal finance and equity trading businesses, Loop Capital had developed close relationships with a number of government officials, large institutional money managers, and corporate executives. These customers began asking Loop Capital for help with other financial services, leading the firm to build corporate finance, tax-exempt, and taxable fixed-income platforms so it could offer a wider array of investment services. Municipal and corporate finance as well as equity, taxable, and tax-exempt trading were generating positive cash flow. In a field where failures were frequent, Loop Capital was thriving, and Reynolds saw great but untapped potential in the company's future. Over the past several years, Loop Capital had served as financial advisor to several municipalities that wanted to lease or sell public assets such as airports, toll roads, and seaports. Now he confronted several intriguing questions: Should he launch a $700 million infrastructure fund to invest in the types of deals the firm had helped structure? Did it make sense to invest in order to staff, market, and support the start-up of this new fund? If the fund was launched, should Loop Capital commit to the 1% investment likely to be required as the fund's general partner?
Rufus Rivers, managing director and co-head of mezzanine investing at The Carlyle Group, is reviewing two employment offers he recently received. One came from RLJ Equity Partners, a private equity firm headquartered in the metropolitan Washington, D.C., area. The other came via Glocap Search, a New York-based executive search firm specializing in placing top private equity executives in premier venture capital roles. The Glocap recruiter had told Rivers that he had been selected as the leading candidate for a position with an established Boston-area venture capital firm that had several exciting investment prospects. In the next few days, Rivers needs to consider his personal and professional interests and make a decision: Should he go to Washington, go to Boston, or stay put-and on what terms?
As CEO of not-for-profit adoption agency The Cradle, Julie Tye had taken the organization from the brink of dissolution in 1992 to a position of financial stability and health by 2007. One of the innovative steps Tye took in 2002 was to introduce an online learning venture that provided education for families preparing to adopt. The Cradle launched Adoption Learning Partners (ALP), using donated funds and government grants when possible and subsidizing the rest. The income generated by ALP grew from zero in 2002 to approximately $50,000 per month in 2007. But ALP's major market (parents preparing to adopt internationally) was forecasted to decline 50% over the next three years; the Web site was outdated; and new competitors were entering the market. ALP had built a reputation as a pioneer in adoption e-learning by providing high-quality, effective online courses. But without the infusion of at least $400,000, ALP risked losing its leadership position and, possibly, its viability. ALP needed a significant investment of time, talent, and funding. Tye had an MBA, a keen business sense, and fourteen years of experience in healthcare administration and the social services field. Even with her leadership, did The Cradle have the appetite to take on such a demanding strategy? In the end, would it be worth the investment?
Doug Cook, an MBA graduate, was wrestling with one of the most important career decisions of his life: Which one of three seemingly promising businesses should he acquire? Each acquisition was a viable opportunity, and each had potential to be a successful business. Cook, however, had heard numerous disconcerting stories about other entrepreneurs going through this process. He realized that until this time the biggest purchase he had made in his life was a $250,000 condominium in downtown Chicago. Acquiring one of these companies would require a financial and personal commitment greater than anything he had ever attempted. He felt a window of opportunity was closing. If he did not act now, he might find himself in the corporate world forever. Cook began by writing up a personal criteria list for his acquisition, then researching online and media sources for businesses for sale. Frustrated with that process, he hired a business broker. With the broker's help, Cook found three promising candidates from which to choose: Luxury Tassels, Inc.; Feldco Windows and Doors, Inc.; and Coyote Consulting Company. The (A) case includes income statements, pro forma forecasts, balance sheets, and organization charts for each company, in addition to Cook's financial analyses and valuation of each company. The (B) case features the letter of intent that Cook gave the owner of the company he selected. Ultimately he did purchase the company, and in the (C) case, Cook examines pathways to growing his newly acquired company.
Doug Cook, an MBA graduate, was wrestling with one of the most important career decisions of his life: Which one of three seemingly promising businesses should he acquire? Each acquisition was a viable opportunity, and each had potential to be a successful business. Cook, however, had heard numerous disconcerting stories about other entrepreneurs going through this process. He realized that until this time the biggest purchase he had made in his life was a $250,000 condominium in downtown Chicago. Acquiring one of these companies would require a financial and personal commitment greater than anything he had ever attempted. He felt a window of opportunity was closing. If he did not act now, he might find himself in the corporate world forever. Cook began by writing up a personal criteria list for his acquisition, then researching online and media sources for businesses for sale. Frustrated with that process, he hired a business broker. With the broker's help, Cook found three promising candidates from which to choose: Luxury Tassels, Inc.; Feldco Windows and Doors, Inc.; and Coyote Consulting Company. The (A) case includes income statements, pro forma forecasts, balance sheets, and organization charts for each company, in addition to Cook's financial analyses and valuation of each company. The (B) case features the letter of intent that Cook gave the owner of the company he selected. Ultimately he did purchase the company, and in the (C) case, Cook examines pathways to growing his newly acquired company.
Doug Cook, an MBA graduate, was wrestling with one of the most important career decisions of his life: Which one of three seemingly promising businesses should he acquire? Each acquisition was a viable opportunity, and each had potential to be a successful business. Cook, however, had heard numerous disconcerting stories about other entrepreneurs going through this process. He realized that until this time the biggest purchase he had made in his life was a $250,000 condominium in downtown Chicago. Acquiring one of these companies would require a financial and personal commitment greater than anything he had ever attempted. He felt a window of opportunity was closing. If he did not act now, he might find himself in the corporate world forever. Cook began by writing up a personal criteria list for his acquisition, then researching online and media sources for businesses for sale. Frustrated with that process, he hired a business broker. With the broker's help, Cook found three promising candidates from which to choose: Luxury Tassels, Inc.; Feldco Windows and Doors, Inc.; and Coyote Consulting Company. The (A) case includes income statements, pro forma forecasts, balance sheets, and organization charts for each company, in addition to Cook's financial analyses and valuation of each company. The (B) case features the letter of intent that Cook gave the owner of the company he selected. Ultimately he did purchase the company, and in the (C) case, Cook examines pathways to growing his newly acquired company.
Ever since he had heard her speak at a private equity conference, Babatunde Omotoba had wanted to work for Venita Fields, co-founder and senior managing director of private equity firm Smith Whiley & Company. He wrote and asked her for an informational interview, and was excited to receive her invitation to meet with her at the firm's regional office in Evanston, Illinois. After the interview, however, Omotoba came to the grim realization that despite all his preparations-researching private equity firms, studying the types of deals they make, and evaluating the analytical tools used to perform due diligence on companies and make investment decisions-he did not have a full grasp on the actual day-to-day work private equity professionals perform. He spent time reviewing materials from the career management office about private equity, and he meets two Kellogg alumni for informational interviews. He also reviews the investment process. The case ends with Omotoba having a broader perspective on the human aspect of private equity, beyond the analytical and financial aspects, as he anticipates meeting Fields again, hopefully to get the job offer.
The case highlights Mike Gilliland, who built a single organic foods store in 1987 in Boulder, Colorado, into Wild Oats Markets, a chain of natural foods stores that by 2001 had annual sales of $1 billion and stores in 38 states. The case includes a history of the natural foods business and explores why Gilliland's timing was so favorable. By the 1980s, when Gilliland got started, the natural foods business had grown and matured, consisting mostly of small specialty stores selling locally grown natural foods. Although the industry was created by the California counter-culturists, it was built into a national phenomenon by the second generation of leaders, including Gilliland and Whole Foods founder John Mackey. The natural foods industry was clubby and congenial until Gilliland sought to grow his business beyond Boulder, Colorado, expanding into four states, including California. Mackey responded by moving into Boulder. Whole Foods became the nation's number one natural foods seller by the early 1990s. Whole Foods went public in 1992, and Wild Oats, in 1996. Whole Foods's success had begun to erode Wild Oats's market share, hurt sales growth, and depress the stock price. Gilliland favored taking Wild Oats in a new direction, modeled after Henry's Marketplace, a San Diego chain that Wild Oats had purchased in 2000. Henry's approach was to offer a product mix that appealed to a broader range of people than did the natural foods stores. Henry's competed effectively with Whole Foods because it had a different customer base; the stores were cheap to build if the company wanted to expand; and the company had showed sustained growth since its founding in 1943. But the Wild Oats board of directors disagreed, opting instead for continuing on the same path. The board also expressed an interest in replacing Gilliland. He now had to weigh his options and contemplate leaving the company he had nurtured for the past twenty years.
In the fall of 2007 a senior director of product marketing at Qwest in Denver, Colorado, gets an offer to work for an entrepreneurial high-growth venture. The vision is for greater wealth, accelerated business opportunity, more thrill on the job, and faster path to leadership by pursuing a position with a start-up firm. Kiva Allgood has management responsibility in her current position (e.g., manages a high-budget portfolio), with compensation of $145,000 in salary and incentive bonuses up to 100% of base salary. She realizes that she is not prepared for the negotiation because she has only negotiated job offers within large firms. She needs to know what many of these entrepreneurial finance terms mean and to understand whether she is being offered terms and amounts commensurate with the value she feels she will bring to the entrepreneur. She also needs to understand her opportunity cost and the expected value of her options: staying with the current job, starting her own venture, or taking this offer at the entrepreneurial venture. She had no idea there were also so many additional, non-financial factors to take into consideration. With her future on the line, she needs to work through the numbers fast. The entrepreneur gave her five days to come back with a counter offer, which he considered a generous amount of time. In evaluating these questions, students will take Allgood's point of view. The case is based on a real job offer to a real person named Kiva Allgood. The entrepreneur and his firm are fictitious in order to heighten the issues in this situation.