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The case is set in April 2018 when, after a 5-year streak of investing success and resultant strong asset inflows, the performance Asia Alpha Management Pvt. Ltd. (AAM), a fictitious hedge fund, begins to lag from the beginning of the year. AAM's co-Founder and Chief Investment Officer, Royston Lim, is struggling to decide what to do with three large positions in his portfolio that are underperforming. Each of these positions is constructed to illustrate the real-world impact of behavioural bias on investment management. Case (A) provides background information on the firm and detailed information on the three positions. After a class discussion on Case (A) to decide what Lim should do, Case (B) describes what actually happened. The concept of behavioural bias is introduced through the subsequent discussion of why Lim made the decisions he made.

Central to a firm's long-term success, is allocating capital so that it generates economic value. The two most common decision rules based on economic value are to (i) accept proposals that have a positive net present value (NPV) when discounted at the appropriate hurdle rate or (ii) to accept proposals whose internal rate of return (IRR) exceeds the appropriate hurdle rate. Key to both rules, in economic terms, the hurdle rate reflects the appropriate opportunity cost of devoting capital to the given proposal rather than an equally risky alternative. The weighted average cost of capital (WACC) is the most commonly used hurdle rate, and this note explains why it is useful as a hurdle rate, discusses how it is calculated, and explores some issues related to its use. A one-page summary of implementation best practices is also provided.

The Piramal Foundation was launched by diversfied Indian conglomerate, the Piramal Group, to improve the healthcare services and quality of education of India's economically and socially disadvantaged. The foundation operates under three verticals-'Piramal Foundation for Education Leadership' (PFEL) for improvements in student learning outcomes; 'Swasthya' for healthcare; and 'Sarvajal' for safe drinking water. Over the years, the Foundation has directly and indirectly benefitted nearly 90 million lives, yet its management team find themselves in a quandary. With finite resources, mostly provided by the Piramal Group, they wonder if they ought to only grow existing programs that show the most promise. They also wonder how to attract more external funding and how to further embed their programs into government platforms in order to create impact at scale.

A discussion between two hedge fund managers is used to examine the merits of investing in Wesfarmers, an industrial conglomerate, following a transformative acquisition of a retail business called Coles, in 2007. Coles had been underperforming and was open to bids from Private Equity firms. It was a classic turnaround story. The case is brought to life as Wesfarmers has announced a demerger of Coles in 2018, hence it enables a comprehensive evaluation of the acquisition. The operation turnaround of Coles has been spectacular and the share price ten years on has also done well. However, the case stresses the importance of capital discipline in acquisitions and what optically can look like a good result, on closer examination may not really be the case. It also brings into the question of risk versus reward. The case examines the ways in which the success of major acquisitions can be assessed and the methods through which conglomerates can operate successfully. Study of conglomerates is in response to evidence of trends towards business diversification, as a means of delivering growth objectives.

Continuation of Case A, IMD988 A discussion between two hedge fund managers is used to examine the merits of investing in Wesfarmers, an industrial conglomerate, following a transformative acquisition of a retail business called Coles, in 2007. Coles had been underperforming and was open to bids from Private Equity firms. It was a classic turnaround story. The case is brought to life as Wesfarmers has announced a demerger of Coles in 2018, hence it enables a comprehensive evaluation of the acquisition. The operation turnaround of Coles has been spectacular and the share price ten years on has also done well. However, the case stresses the importance of capital discipline in acquisitions and what optically can look like a good result, on closer examination may not really be the case. It also brings into the question of risk versus reward. The case examines the ways in which the success of major acquisitions can be assessed and the methods through which conglomerates can operate successfully. Study of conglomerates is in response to evidence of trends towards business diversification, as a means of delivering growth objectives.

The case is based on the fixed income investment team at Value Partners Group Limited (VP), a publicly-listed, Hong Kong-based fund and asset management company founded in 1993, focusing primarily on Greater China and Asian investments and following an investing approach referred to as value investing. Set in December 2014, the cumulative returns from September to November 2014 for the Value Partners Greater China High Yield Income Fund (The Fund)-the firm's flagship fixed income fund-were negative. The year had started out slowly, but momentum picked up in the summer until a number of external events affected returns, including: Occupy Central in Hong Kong; the market's concern about the end of the US Federal Reserve's quantitative easing; Chairman Xi's anticorruption campaign in Beijing; and the Chinese property market suffering from excess inventory. Investors reacted to these events by pulling their money out of The Fund, and September returns for The Fund were down 2.2% for the month. The December bond market movement was drastic enough that Gordon Ip, Fixed Income Fund Manager for VP, and his team needed to react. Ip was under intense pressure to increase performance, since December was the last month of the year and investors would more closely scrutinize his performance. He needed to make a decision.

This case is from the point of view of Peter Clarke, Vice President of Mergers and Acquisitions for Lockheed Martin's Information Systems and Global solutions (IS&GS) division. Clarke has a personal decision to make about keeping his substantial Lockheed stock holding or converting to the partner company (Leidos Holdings) stock. About a year prior to the decision point in the case, Lockheed made a strategic decision to divest its IS&GS division, which engaged in consulting (largely defense and other governmental agency consulting). Clarke reviews Lockheed's actions which led up to the decision to divest the IS&GS division through a Reverse Morris Trust (RMT), which included rejecting a more conventional spin-off or outright sale. The RMT, a complex transaction which required the creating of a new company and a merger with a second company, Leidos Holdings, allowed the divestiture to be tax-free. There were a number of rules required for this transaction; for example, former Lockheed shareholders needed to own more than 50% of the resulting company. Clarke believed the enterprise IT, cybersecurity, intelligence, health IT, and engineering business was a good growth area. Clarke needed first understand this unusual financial transaction and make a personal decision about whether keeping his Lockheed shares or exchanging them for Leidos shares would be the best decision for him.

This case discusses the phenomenon of high-ratio stock splits in China's capital market. Unlike in the U.S. capital market, where cash dividends are common, high-ratio stock splits in China are often associated with sharp stock price fluctuations and attract close attention from investors, listed companies, and regulators alike. In April 2018, the two Chinese stock exchanges released the most stringent regulations to date to prohibit ineligible companies from carrying out such practices. Nonetheless, there were still many cases where companies found ways to circumvent the rules to continue high-ratio stock splits. In the first half of 2018, Profit Cultural & Creative Group (PCCG) and Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd. (WolwoPharma) announced a 1.8-for-1 stock split together with a cash dividend of ¥0.25 per share and a 1.8-for-1 stock split together with a cash dividend of ¥0.4 per share, respectively. Although the stock prices of both companies went up initially after the announcement, the prices moved in the opposite direction after the ex-rights date. What were the motivations behind the listed companies' high-ratio stock splits? Why did the stock prices of the two companies show different patterns after the stock split? How should investors respond to high-ratio stock splits?

The case presents an investment opportunity in a Chinese technology company by using a variable interest entity (VIE). Since foreign ownership is restricted in certain sectors of the Chinese economy, like technology, a VIE can be used to structure around such regulations. VIEs are complex arrangements that rely on an intricate network of contractual relationships that have been designed to mitigate, but cannot eliminate the risk of investing without becoming a shareholder of the investment target. As almost all Chinese technology companies that are listed on exchanges outside of China use a VIE structure, it is important to understand the possible risks associated with investing via a VIE. Examples such as Alibaba are used to illustrate the risks related to using a VIE to access Chinese investment opportunities.

Matthew Andrews and Elizabeth (Liz) Graham had recently graduated college and planned to get married soon. They had both accepted jobs in Washington, DC, and would be moving to Gainesville, Virginia. Matthew would be working as a software engineer with both medical and life insurance, and Liz was taking a job as an advertising agent with no benefits. Until they started their jobs, neither Matthew nor Liz had health insurance. This was a source of real concern, especially since they recently had found out Liz was pregnant. They decided to sit down, go over the benefits offered by Matthew's employer, and make some decisions about which health insurance plan might be best for them, as well as consider life insurance and disability insurance options.

This technical note outlines the general judicial requirements an acquisition must meet to qualify as a tax-deferred reorganization. The variation in the specific requirements that must be met to qualify for different types of tax-deferred ("A," Forward Triangular "A," Reverse Triangular "A," "B," and "C") reorganizations are addressed. Finally, the specific tax consequences to the target's shareholders and acquirer are outlined, and a numerical example illustrates the calculation of the after-tax proceeds to the target's shareholders and the after-tax cost to the acquirer.

Student spreadsheet to case UV7773

This technical notes discusses three basic deal structures used to acquire another corporation. Asset acquisitions, stock acquisitions, and mergers under state law are the three common legal forms discussed.

On April 14, 2014, CapitaLand Limited, a Singapore-based real estate company, launched a voluntary conditional cash offer of SG$2.22 for each share (SG$3.06 billion in total) of its subsidiary commercial property development and management company, CapitaMalls Asia Limited (CMA). CMA's principal business strategy was to invest in, develop, and manage a diversified portfolio of real estate used primarily for retail purposes in Asia. CapitaLand's offer represented a 22.3 per cent premium over CMA's closing price of SG$1.815 on April 11, 2014. The intention was to delist CMA and fully integrate it into CapitaLand. As an investor in CMA, you are seeking a reasonable valuation of CMA based on its past financial performance and other relevant market information. You also need to compute the premium, net present value (NPV), and synergy of the acquisition.

On April 14, 2014, CapitaLand Limited, a Singapore-based real estate company, launched a voluntary conditional cash offer of SG$2.22 for each share (SG$3.06 billion in total) of its subsidiary commercial property development and management company, CapitaMalls Asia Limited (CMA). CMA’s principal business strategy was to invest in, develop, and manage a diversified portfolio of real estate used primarily for retail purposes in Asia. CapitaLand’s offer represented a 22.3 per cent premium over CMA’s closing price of SG$1.815 on April 11, 2014. The intention was to delist CMA and fully integrate it into CapitaLand.<br><br>As an investor in CMA, you are seeking a reasonable valuation of CMA based on its past financial performance and other relevant market information. You also need to compute the premium, net present value (NPV), and synergy of the acquisition.

Spreadsheet for product 8B19N012.

Spreadsheet for product 9B19N012.

At the end of 2017, the director of HY Capital, was facing an investment decision. Two years earlier, HY Capital had invested in Dalian New Vision Media Co. Ltd. (New Vision), a company working on augmented reality products for early childhood education. The investment provided New Vision with sufficient funds to enter the market. However, after a quick success, New Vision had saturated the market and could not make further significant progress. Thus, New Vision’s management team proposed to alter the company’s strategy to move into kindergarten to grade 12 after-school education. The strategic shift could be lucrative, but it was risky and would require more funds to support product development. The director was now wondering, should HY Capital support New Vision with further investments or just exit the investment?

This case follows Nate Jamison as he determines which business entity to form for his growing City Moving Company (City Moving) in Washington, DC. From the start, Jamison operated City Moving as a sole proprietorship while he bootstrapped the business. Eventually he was able to get his own truck and hire two steady employees, and the three hope to formalize a business partnership to expand City Moving so that all three men can lead their own moving teams. To document the new ownership agreement, the partners know they need to properly register City Moving as a business entity. But which one would best fit City Moving's needs?