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The Global Financial Crisis (2007-2009) has provided fertile ground for careful consideration of how the financial services industry operates. For many years it had been asserted that markets can self-police so regulation and careful oversight are not required. The events from the crisis have caused many of the strongest proponents of this view, such as Alan Greenspan (past chairman of the Federal Reserve), to publicly acknowledge the problems with this belief. This case considers the events leading up to and following the bailout of AIG to allow for a discussion of how different internal and external factors contributed to the crisis at AIG, and the importance of studying each of them more carefully to avoid such problems in the future.

This case examines Dimensional Fund Advisors (DFA)'s decision to enter the retirement market with their new "Dimensional Managed DC" product, a complete retirement solution that aimed to provide investors with what they really wanted: the same standard of living in retirement that they had while working. The case considers the challenges of entering the fiercely competitive retirement market, introduces students to the large literature on the behavioral biases of individual investors, and asks students to evaluate an innovative new financial product designed to automate the process of retirement investing.

The case describes the financial performance and business development of UFC after the change in ownership that happened in 2000, until 2004, when the owners are considering exiting the business.

For many years, Towers Watson (TW) has conducted its own research into alternative approaches to market cap investing. Philip Tindall senior investment consultant with TW was impressed by a recent presentation by the CIO of Research Affiliates (RA) about an innovative investing concept called the "Fundamental Index methodology." He thinks it might be an important innovation in applying nonmarket cap approaches, but he has some concerns about the approach and whether or not it would be appropriate for TW clients. Clients depended on TW to keep them on the cutting edge of institutional investing, but recommending an untried investment strategy and deviating from status quo investment practice could either generate outperformance relative to their investment consulting competitors, thereby attracting new clients, or it could result in underperformance and defection of their clients to those competitors.

In 2011, Equity International made a $75 million equity investment in Bogota-based real estate company, Terranum Development and became the first institutional real estate investor in Colombia.

Spreadsheet Supplement for case UV5654.

Following the lean years of the Great Depression when bankruptcies proliferated and financing for new ventures virtually dried up, new demand for capital was created in a post-War environment of scientific and industrial expansion. Venture funding occurred more widely in the United States than it ever had done before. While the roots of the American venture capital industry are long-standing and multifaceted, they are frequently traced back to the pioneering initiatives of the French General and Harvard Business School professor, Georges Doriot, who established the American Research and Development Corporation (ARD) in 1946.

Spreadsheet supplement for case 212-044

In this case, a property company, a water privatizer, and municipal engineers explore the causes of and solutions to a severe water shortage in Mexico City, a great global capital. The protagonist is a real estate investor doing due diligence on the magnitude of the crisis, the impact on the firm's operations, and the likelihood of resolution. Due diligence includes interviews with city water officials and global-scale water privatizers. This case is an excellent introduction to city scale infrastructure issues on a global level. A related case, "Water Shortage and Property Investing in Mexico City," HBS No. 210-085, contains more real estate finance and less water infrastructure finance material than this case does.

The cost of capital is one of the most important concepts in finance. It is the minimum acceptable rate of return that new investments must yield and it represents the long-term opportunity cost of the funds used by a company. If management decides to invest in projects with expected returns above the cost of capital, the company value goes up. Conversely, if a company invests in projects (that despite having positive profitability) with expected returns below the cost of capital, it destroys value and company value goes down. Similarly, the cost of capital is the discount rate that should be used in a discounted cash flow (DCF) analysis, in capital budgeting applications, when valuing a company or a division, or an acquisition target.

The value of a firm depends not only on the cash flows it provides to its investors, but also on the timing, as well as the risk of those cash flows. This note focuses on the main methods used to value companies, whether it is in a merger and acquisition setting or not. It covers concepts such as: 1) The discounted cash flow (DCF) method; 2) Discount rates and cost of capital; 3) Valuation using multiples; 4) Value creation through mergers and acquisitions (M&As).

The case is set in February 2006, right after Sonaecom's announcement of its takeover bid for Portugal Telecom (PT) of €9.50 per share. The reader does not yet know how PT will react and whether its management will accept the offer or not. The case recounts this fascinating and intense M&A transaction, taking us through one of the largest takeover bids ever in the European Telecom sector, with a deal value above €15 billion. How will PTs board regard this bid? On the one hand, it represents a 20% premium over the prior stock price. On the other hand, it is a terrible blow to the international aspirations of the PT group. Moreover, the sometimes conflicting views of the general public, the competition regulator, employees and the government have the potential to complicate matters further. Lastly, this deal also has important international implications. One thing is sure. Given all the external pressure, for example from regulators, nothing will be the same for PT or the Sonae Group after this offer. The case serves as a rigorous application of valuation methodology with a focus on understanding the difficulties in forecasting future cash flows and the sensitivity of the valuation analysis to underlying assumptions.

Most management teams are caught off guard when their company becomes the target of a takeover. However, P's management team had seen it all from the other side before and knew just what to do. They viewed this challenge professionally. After declining the €9.50 bid, Portugal Telecoms board formed a special committee to lead the defense strategy. However, the board also confirmed it was not saying no to a deal: We wo't defend at any price. We will do what is right for shareholders, stated Zeinal Bava, P's CFO.

In February 2007, Sonaecom revised their bid to €10.50 per share. Less than one week later, the PT Board wrote to its shareholders maintaining the rejection of this new offer. So far, most shareholders had not manifested their views publicly. PT had been fighting hard for its independence. But would economic conditions be right for Sonaecom's takeover bid to succeed? What would it take to convince shareholders to accept? PT's international roadshow was reaching an end. How would investors react to all this information? Was it time for PT to sit down with Sonaecom?

In March 2007, more than a year after Sonaecom had announced its original takeover bid for Portugal Telecom (PT), things had progressed: new investors had come along, the authorities had approved the deal, both parties were holding roadshows, and finally Sonaecom increased its offer price to€10.50. The day before the final shareholders' meeting (2 March 2007), when the votes would be counted, everyone was doing their own numbers. According to the company's bylaws, votes cast by a single shareholder whose shares exceeded 10% of the share capital would not be counted. Sonaecom's offer was conditional on the removal of this restriction. The removal of this restriction had to be approved by two-thirds of the shareholders present at the AGM. After that, for the offer to be successful, Sonaecom would have to have the support of at least 50.01% of PT's shareholders to its €10.50 per share offer. This was one of the largest deals ever in the Telecoms sector, and investors from around the world were placing their bets on who was going to win the battle.

Case A of this series sets the scene for the largest merger and acquisition (M&A) deal in the telecom industry in Brazil and Latin America. Cases B to F follow on by relating the events up to the deal's conclusion. The sequencing of this story creates a sense of urgency for readers and forces them to take position on different questions at different times. Events began in 2003 when a 50:50 joint venture (JV) between Portugal Telecom (PT) and Spain's Telefónica acquired 60% of Vivo, the leading Brazilian mobile operator. In the subsequent years, Vivo experienced double-digit annual growth, as it reaped the benefits of its own heavy investments and booming consumer demand. In May 2010, Telefónica made a€5.7 billion cash bid for PT's share of the JV. According to Telefónica, this was a full, fair and final offer. How would PT's board regard the bid? On the one hand, it represented a 100% premium on Vivo's pre-announcement stock price. On the other hand, it was a terrible blow to the PT Group's international aspirations. Moreover, the occasionally conflicting views of the general public and the government had the potential to complicate matters further. Lastly, this deal also had important international implications. The case shows how: a) corporate governance practices vary across countries, including environments where there are dual-class shares; and b) the role of corporate governance in ensuring that managers undertake activities that maximize shareholder value as well as serving the needs and strategy of the company. The case also allows for an in-depth analysis of a variety of strategic, organizational, financial and economic issues related to growth strategies through JVs and M&As. The key focus of the case is on the links between finance and strategy.

Case A of this series sets the scene for the largest merger and acquisition (M&A) deal in the telecom industry in Brazil and Latin America. Cases B to F follow on by relating the events up to the deal's conclusion. The sequencing of this story creates a sense of urgency for readers and forces them to take position on different questions at different times. Events began in 2003 when a 50:50 joint venture (JV) between Portugal Telecom (PT) and Spain's Telefónica acquired 60% of Vivo, the leading Brazilian mobile operator. In the subsequent years, Vivo experienced double-digit annual growth, as it reaped the benefits of its own heavy investments and booming consumer demand. In May 2010, Telefónica made a €5.7 billion cash bid for PT's share of the JV. According to Telefónica, this was a full, fair and final offer. How would PT's board regard the bid? On the one hand, it represented a 100% premium on Vivo's pre-announcement stock price. On the other hand, it was a terrible blow to the PT Group's international aspirations. Moreover, the occasionally conflicting views of the general public and the government had the potential to complicate matters further. Lastly, this deal also had important international implications. The case shows how: a) corporate governance practices vary across countries, including environments where there are dual-class shares; and b) the role of corporate governance in ensuring that managers undertake activities that maximize shareholder value as well as serving the needs and strategy of the company. The case also allows for an in-depth analysis of a variety of strategic, organizational, financial and economic issues related to growth strategies through JVs and M&As. The key focus of the case is on the links between finance and strategy.

Case A of this series sets the scene for the largest merger and acquisition (M&A) deal in the telecom industry in Brazil and Latin America. Cases B to F follow on by relating the events up to the deal's conclusion. The sequencing of this story creates a sense of urgency for readers and forces them to take position on different questions at different times. Events began in 2003 when a 50:50 joint venture (JV) between Portugal Telecom (PT) and Spain's Telefónica acquired 60% of Vivo, the leading Brazilian mobile operator. In the subsequent years, Vivo experienced double-digit annual growth, as it reaped the benefits of its own heavy investments and booming consumer demand. In May 2010, Telefónica made a €5.7 billion cash bid for PT's share of the JV. According to Telefónica, this was a full, fair and final offer. How would PT's board regard the bid? On the one hand, it represented a 100% premium on Vivo's pre-announcement stock price. On the other hand, it was a terrible blow to the PT Group's international aspirations. Moreover, the occasionally conflicting views of the general public and the government had the potential to complicate matters further. Lastly, this deal also had important international implications. The case shows how: a) corporate governance practices vary across countries, including environments where there are dual-class shares; and b) the role of corporate governance in ensuring that managers undertake activities that maximize shareholder value as well as serving the needs and strategy of the company. The case also allows for an in-depth analysis of a variety of strategic, organizational, financial and economic issues related to growth strategies through JVs and M&As. The key focus of the case is on the links between finance and strategy.