個案總覽

This case describes the strategies and business models of Alibaba and JD.com (JD). After more than ten years of development, two giants-Alibaba, the world's largest online marketplace operator, and JD.com (JD), China's largest online direct sales operator-towered over China's e-commerce industry. In 2014, Alibaba and JD were listed successively, and in the first half of 2015, they disclosed their first annual reports after listing. These two financial statements attracted the attention of Zhang Wei, a sell-side investment manager who has just graduated from his EMBA program. To prepare for questions from his clients, he has begun to think about the differences between the strategies and business models of Alibaba and JD. How would these differences affect their financial statements? What are the investment highlights of the two companies?

This case describes how Alibaba and JD built their business empires and delivered results using their respective business models after going public. Shortly after Alibaba and JD.com (JD) released their respective annual financial reports in the first half of 2019, Zhang Wei, who had been recently promoted to Investment Manager, got a call from an institutional investor. The investor intended to purchase shares of Alibaba or JD, and hoped to assess the two companies' investment value from a financial perspective. Alibaba and JD adopt different development strategies and business models, ranking the top two in China's e-commerce arena. Which company is of higher investment value: Alibaba or JD? As a business school graduate, Zhang Wei has decided to analyze the two companies' financial statements, and based on that, evaluate the two companies' investment value and investment risk.

In late 2016, it had been three years since Blackstone Group Inc. (Blackstone) had completed its last public-to-private leveraged buyout (LBO), and it had US$45 billion of capital available for investment, called “dry powder.” Blackstone’s head of private equity (PE) blamed this public LBO drought on “historically high multiples of cash flow.” Blackstone submitted a preliminary offer to acquire a firm they had previously acquired 11 years earlier and exited in 2009. The banks committed to provide a senior credit facility, consisting of a seven-year Term Loan B, a revolver, and junk bonds; management provided forecasts of revenue and earnings before interest, tax, depreciation, and amortization. The four-week exclusivity period was set to expire, and previous bidders in a recent takeover battle could re-emerge. Blackstone had to determine a final offer based on their LBO model.

Supplement for product 9B20N018.

Spreadsheet to accompany product 9B20N018.

In late 2016, it had been three years since Blackstone Group Inc. (Blackstone) had completed its last public-to-private leveraged buyout (LBO), and it had US$45 billion of capital available for investment, called "dry powder." Blackstone's head of private equity (PE) blamed this public LBO drought on "historically high multiples of cash flow." Blackstone submitted a preliminary offer to acquire a firm they had previously acquired 11 years earlier and exited in 2009. The banks committed to provide a senior credit facility, consisting of a seven-year Term Loan B, a revolver, and junk bonds; management provided forecasts of revenue and earnings before interest, tax, depreciation, and amortization. The four-week exclusivity period was set to expire, and previous bidders in a recent takeover battle could re-emerge. Blackstone had to determine a final offer based on their LBO model.

B case to W20532

Student spreadsheet to case W20532

In September 2018, WaterEquity, a US-based investment vehicle for both financial and social returns, had to raise US$50 million in total funding capital. The sales team had to propose sales pitches for alternative investments for three types of investors. From a financial perspective, the investment was essentially a risk-free asset with an annual return of 3.5 per cent. However, this investment could also positively affect four developing countries-India, the Philippines, Indonesia, and Cambodia-by providing clean water solutions for billions of people. Through the lending facilities of the local microfinance institutions of these four countries, WaterEquity could offer support to the poor and empower more women, generating both financial and social returns. Different groups of investors might be attracted by different levels of these social returns as well as the financial returns. The sales team planned to use a simple extension of the standard Markowitz portfolio theory framework to incorporate social returns and account for two distinct types of returns, customizing the sales pitches for each of three groups of investors.

Student spreadsheet to case W20516

In April 2013, TransDigm, a company that manufactured a wide range of highly engineered aerospace parts for both military and commercial aircraft, announced an agreement to acquire Aerosonic Corporation for $39 million in cash (1.2 times Aerosonic's sales of $31 million). Having acquired more than 40 companies in the past 20 years, TransDigm was an experienced acquirer with a unique business model focused exclusively on value creation. This case describes TransDigm's acquisition process with a focus on the merger negotiations and the key contractual terms in the merger agreement (break-up fees, go shop period, standstill provision, top-up options, etc.). It serves as a complement to the TransDigm in 2017 case (HBS #720-422). Whereas the TransDigm case provides an overview of the company, its history, its value creation strategy, and its financial performance, the Aerosonic case provides a deep dive into a single transaction as a way to illustrate TransDigm's acquisition-driven growth strategy and to practice valuing an acquisition offer using multiple methods. Ultimately, the goal is to understand the change in value from a standalone company to a fully integrated and value-enhanced subsidiary of the TransDigm Group.

Spreadsheet for product 8B20N016.

Spreadsheet for product 9B20N016.

In September 2018, WaterEquity, a US-based investment vehicle for both financial and social returns, had to raise US$50 million in total funding capital. The sales team had to propose sales pitches for alternative investments for three types of investors. From a financial perspective, the investment was essentially a risk-free asset with an annual return of 3.5 per cent. However, this investment could also positively affect four developing countries—India, the Philippines, Indonesia, and Cambodia—by providing clean water solutions for billions of people. Through the lending facilities of the local microfinance institutions of these four countries, WaterEquity could offer support to the poor and empower more women, generating both financial and social returns. Different groups of investors might be attracted by different levels of these social returns as well as the financial returns. The sales team planned to use a simple extension of the standard Markowitz portfolio theory framework to incorporate social returns and account for two distinct types of returns, customizing the sales pitches for each of three groups of investors.

On October 27, 2017, the share price of McKesson Corporation and two other major US pharmaceutical distributors dropped by 7-12 per cent over only a few days. The stock price drop was fuelled by reports that Amazon Inc. had quietly acquired wholesales pharmacy licences in 12 US states and, a short time later, formed an independent venture with Berkshire Hathaway Inc. and JP Morgan Chase & Co. to improve the cost and quality of health care for the US employees of all three companies. These two notable events in the US pharmaceuticals market did not go unnoticed by a group of students enrolled in a value investing class, who wondered if it was possible for Amazon Inc. to disrupt the US health care industry, or if the market was overreacting to the two reports. Was McKesson Corporation's future in the pharmaceutical distribution business in jeopardy, or was its stock suddenly in a favourable buy position?

Student spreadsheet to case W20488

This case uses the California Public Employees' Retirement System (CalPERS) to set the stage for unfolding an analysis of economics and values in the decision to divest tobacco stocks and bonds from the internally managed portion of the CalPERS portfolio. Written from public sources, it offers a discussion about fiduciary responsibility for long-term retirement security and investment policies around environmental, social, and governance (ESG) strategies for the public pension fund. The material includes financial data that further allows calculations and discussion on tobacco investments outperforming the broader market. This A case opens with the CalPERS investment committee having made a decision to recommend removing tobacco investment restrictions. The CIO reflects on whether supporting investment in tobacco firms conflicts with CalPERS's member health and health care mission. Did supporting continued divestment mean CalPERS was putting its own social priority and ideals ahead of its clients' investment goals? The case data should lead most to conclude the fund was breaching its fiduciary duty.

This case uses the California Public Employees' Retirement System (CalPERS) to set the stage for unfolding an analysis of economics and values in the decision to divest tobacco stocks and bonds from the internally managed portion of the CalPERS portfolio. Written from public sources, it offers a discussion about fiduciary responsibility for long-term retirement security and investment policies around environmental, social, and governance (ESG) strategies for the public pension fund. The material includes financial data that further allows calculations and discussion on tobacco investments outperforming the broader market. The A case opens with the CalPERS investment committee having made a decision to recommend removing tobacco investment restrictions. The CIO reflects on whether supporting investment in tobacco firms conflicts with CalPERS's member health and health care mission. Did supporting continued divestment mean CalPERS was putting its own social priority and ideals ahead of its clients' investment goals? The case data should lead most to conclude the fund was breaching its fiduciary duty. This short B case can be handed out in class. This deepens discussion around ESG, the investment fund's duty, and retirees' frustration. Despite the CalPERS investment committee's recommendation to remove restrictions on investing in tobacco stocks, the board of administration decided to broaden limitation and extend the ban to externally managed portfolios in December 2016. Two years later, opposition to CalPERS's divestment strategy took the form of a campaign to run for a seat on the board of administration. This was followed with the appointment of another CIO who strongly supported ESG investment strategies.

In January of 2019, Joe Heieck (HBS '14), CEO of gWorks, was deciding whether to proceed with his acquisition of Data Tech, that was a business roughly the same size of gWorks. gWorks, which provided geospatial software to small city and rural county governments, was acquired by Heieck in January 2015 after a 6 month search. While there were potential synergies between gWorks and Data Tech, the acquisition also presented some significant risks including its relatively high price and concerns about the need to modernize its product offerings.

Case B contains a description of the deal between the Trust's original Sponsor (Sterlite Power) and a new set of financial investors led by KKR. The new investors first entered as an additional Sponsor and eventually replaced the original Sponsor to become the IndiGrid Trust's sole Sponsor. Through the deal, the incoming investors and the eventual Sponsor committed to buying five of the original Sponsor's transmission projects as and when they became operational, with two such operational projects to be acquired immediately. The case concludes with a summary of the consequence of this change on the outlook of the Investment Manager, now owned by the incoming Sponsor. The Investment Manager, freed from the limiting interest of the original Sponsor, had to search for investment opportunities from the perspective of incoming financial investors, which included the new Sponsor.