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Spreadsheet supplement for case UV5641.

This case examines the decision by the Swiss pharmaceutical Roche Holding AG (Roche) to offer a record $42 billion bond in February 2009. In light of a pending acquisition of U.S. biotechnology leader, Genentech, Roche management planned to sell $32 billion in bonds at various maturities from 1 year to 30 years and in three different currencies (U.S. dollar, euro, and British pound). In a context of substantial uncertainty in both world financial markets and the value of the Genentech deal, students are introduced to the pricing of corporate bonds by being invited to price Roche's bold global offering.

The founders of start-up biotech company Chiral Intermediates have an important decision to make. How much money to raise? When? And from what kinds of funding sources? This exercise walks through the market for chiral intermediates (a material that reduces harmful drug side effects), this new company's business model, and its quest for seed-stage financing.

Harmonic is a small, privately held manufacturer of hearing aids. Harriet Burns and Marc Davis, two employees at Harmonic, have an opportunity to purchase the company from the founder. As well-informed insiders who understand the industry, Burns and Davis believe the benefits of ownership far outweigh the risks. While the decision to purchase Harmonic is easy for them, arranging financing proves more difficult. The company is preparing to launch a new hearing aid product and Burns and Davis want the financing package to include the additional capital required to complete both the development and the launch. Two financing alternatives are presented: one is virtually all debt-financed, the other all equity. The financing structure Burns and Davis select will have a significant impact on the products and future prospects of the company. Students must analyze the two financing alternatives, determine the advantages and disadvantages, and recommend the best option.

Spreadsheet Supplement for 4271

One of the world's leading investors in distressed companies, Oaktree Capital Management is contemplating a "loan to own" investment in the debt f Countrywide plc, a financially troubled residential real estate agent based in the U.K. Only sixteen months earlier, Countrywide was acquired by a private equity investor Apollo Management L.P. in a leveraged buyout. Although Countrywide is the largest real estate agent in the U.K., and has a strong portfolio of assets, its economic fortunes have declined suddenly with the widespread collapse of global financial and real estate markets, putting it in danger of defaulting on its debt and having to restructure under a U.K. Scheme of Arrangement.

This note focuses on the valuation of late-stage companies with a particular emphasis on leveraged buyouts (LBOs). In addition to LBOs, late-stage investments can arise in situations involving growth equity, turnarounds, mezzanine investments, and distressed debt. In contrast to venture capital, where firms are typically at an early stage of development, late-stage investments involve more established businesses that have an ability to take on higher levels of leverage to augment investor returns. While in practice there are several approaches to valuation, the approach chosen often comes down to which provides the most accurate representation of the situation and perspectives of the parties involved. This note takes the perspective of a PE investor and assumes some basic familiarity with the structure of PE investing. It provides a basic overview of the primary sources of financing and the metrics used to gauge LBO capital structures and a step-by-step example of an LBO analysis.

The owner of Finchco plans to sell his company. The purpose of the case is to utilize several valuation methods and to suggest the possible deal structure. The case is made somewhat more complicated by the fact that Finchco has a real estate subsidiary, which must be valued and the company has a great opportunity to land a major new customer whose value must be included in the analysis.

An equity analyst uses a variety of methods to value Walmart shares, with a view to making a buy/sell or hold recommendation for the stock.

Spreadsheet supplement for case W11058.

To decide whether to initiate a position in gold, the protagonist must assess its features as a strategic component in any portfolio as well as whether the time is right for an opportunistic tactical allocation. Factors that must be considered include how supply and demand for gold will be affected by the paths of real interest rates, inflation expectations, the euro zone debt crisis (and other financial stresses), and the international value of the U.S. dollar, among other factors.

The protagonist's task today, as oil prices approached $125/barrel, was to decide whether her pension fund should allocate some funds to oil, and if so, how much? At this point-February 2012-there were many reasons to think about adding oil to her fund. To decide whether to initiate a position in oil, the protagonist must assess its features as a strategic component in any portfolio as well as whether the time is right for an opportunistic tactical allocation. Factors that must be considered include how supply and demand for oil will be affected by global economic policy, geopolitical concerns, and rising demand from emerging markets, among other factors.

Spreadsheet for case 211090.

Rehan Jaffer, the founder of hedge fund H Partners, is considering what to do with his investment in Six Flags. H Partners had invested a significant amount of the firm's capital in the senior bonds of U.S.-based Six Flags, following that company's bankruptcy filing.

Rehan Jaffer, the founder of hedge fund H Partners, is considering what to do with his investment in Six Flags. H Partners had invested a significant amount of the firm's capital in the senior bonds of U.S.-based Six Flags, following that company's bankruptcy filing.

A hedge-fund strategist had two decisions to make. First, what was the path of core euro zone long-term interest rates likely to be over the next year? Was the dramatic decline in German long rates over the past two years an aberration that would soon be reversed, or was it part of the "new normal" that would persist for some time? Second, how would periphery long rates evolve relative to core rates? That is-the spread between long rates in the likes of Greece, Spain, and Ireland and those in Germany-how would they evolve over the next year? Was the dramatic divergence in euro zone long rates likely to persist, or would the coming year see a reconvergence? He knew many factors influenced long-term interest rates; he would have to use his entire toolkit to address this issue. The evidence was in no way clear-cut. Some factors pointed toward lower German rates, some toward higher, some toward a widening of euro zone spreads (even a dissolution of the euro zone as we know it?), and some toward reconvergence. To form an opinion on the likely paths of euro zone long rates, he would have to sort through mounds of information.

The protagonist was sifting through the evidence on the predictive content of the yield curve. Did the current steepness of the yield curve mean that a double-dip recession was highly unlikely? And when the yield inverted in the future, as it surely would at some point, would that be a precursor to a recession? From time to time, the market focused on the slope of the yield curve. What can it tell us?

Late in August 2004, Chris Higgins was forced into the unenviable position of determining the future of Ring-A-Wing, a London, Ontario-based fast food producer of premium chicken wings for home delivery. After making a personal loan to a friend wishing to invest in the business, the situation devolved in less than nine months from Higgins being a passive lender to being a significant investor to sitting in a bankruptcy meeting trying to determine the future of the business. The issue in the (A) case is whether the Higgins group should reopen Ring-A-Wing.

This case is a supplement to Ring-A-Wing (A).

This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. A senior associate in the business development group at American Cable Communications, one of the largest cable companies in the U.S., must prepare a preliminary valuation for acquiring AirThread Connections, a regional cellular provider. The acquisition would give American Cable access to wireless technology and the wireless spectrum and enable the company to offer competitive service bundles including wireless, currently a hole in the company's service offering. Students learn the basic valuation concepts including DCF (discounted cash flow) using APV (adjusted present value) and WACC (weighted average cost of capital) and they must choose the appropriate approach for situations in which the capital structure is changing or assumed to be constant. Students must consider the effect of constant debt versus the D/V (debt-to-value ratio) in estimating betas and the costs of capital. In addition, students analyze the effects of non-operating assets on valuation. As an additional assignment, instructors can require students to consider the personal tax disadvantage of debt as well as the synergies American Cable expects to achieve following the acquisition.