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Economics & Finance

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published: 24 Jun 2016

  • Topic: Economics & Finance
  • Industry: Aluminium, nonferrous metals
  • Region: Middle-East

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Abstract:
Privatization of state-owned enterprises represents a significant realm of business for investment banks around the world. It also involvew balancing a number of sometimes conflicting objectives among buyers and sellers and a host of risks for both sides as well as the financial firm itself. This case focuses on a large partial privatization in the Middle East that illustrates all of these issues and came to define the requirements for investment banks to perform successfully in future privatizations.

Pedagogical Objectives:
The objective is to identify and dissect the entire value-chain in the privatization process, starting with mandate-seeking, IPO design and placement strategy/tactics, book-building and pricing, syndication and road-shows, as well as providing after-market support and liquidity. From this partial privatization in a sensitive part of the world, students are asked to identify the risks and returns to the various parties involved. Stock performance data are provided on post-IPO performance through 2013.

Keywords:
Privatization, Ipos, Equity Markets, Global Capital Markets, Aluminium, Global Investors, Underwriting Risk, Financial Integration, Corporate Governance, Auditing, Risk Control and Performance

published: 27 May 2016

  • Topic: Economics & Finance
  • Industry: Infrastructure
  • Region: North America

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Abstract:
In September 2014, the Indiana Toll Road (ITR) in the US Mid-west, privatized as a 75-year concession at an impressive price of US$3.8 billion only nine years earlier, filed for Chapter 11 bankruptcy , having chalked up US$6.3 billion of debt. In the subsequent sell-off the ITR managed to attract an even bigger bid than before - of US$5.72 billion.

Pedagogical Objectives:
The valuation of infrastructure assets; determining the right discount rate; pros and cons of public-private partnerships; the "winner's curse".

Keywords:
Toll Road, Infrastructure, Public-Private Partnership (ppp), Project Finance, Privatization, Step-Up Swap, Inner's Curse, Corporate Governance, Auditing, Risk Control and Performance

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published: 27 May 2016

  • Topic: Economics & Finance
  • Industry: Media: print and online
  • Region: North America

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Abstract:
Dow Jones, publisher of The Wall Street Journal, had been a source of wealth, pride and prestige for the Bancroft family for much of the 20th century. From 1928 to 2007, the family lived off company dividends and left the day-to-day management of the publishing business to senior journalists who had worked their way up through the ranks of the WSJ. But in 2007, when Rupert Murdoch – whose global media empire dwarfed that of the Bancrofts – offered to buy Dow Jones at a generous premium, the family was split down the middle. To sell or not to sell? The case explores the events that led up to the dynasty’s exit and the grandiose entrance of an Australian-American media mogul onto the US media scene.

Keywords:
Dow Jones, Media Acquisition, Wall Street Journal, Class B Shares, Rupert Murdoch, Bancroft, Family Business, Dual Shareholding

published: 24 Mar 2016

  • Topic: Economics & Finance
  • Region: Global

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Abstract:
A multi-issue 1-on-1 negotiation between an aging Italian entrepreneur in North Africa (Luca Lombardi) and a young M&A specialist from a large Asian corporation (Anna Chuan). All the due diligence has been completed and the parties are now ready to discuss the price for the Lombardi company. Role-players can either fall into bargaining (an exchange of numbers) since their ideas of what the company is worth are completely at odds, or discuss the assumptions behind their numbers and valuations to reach a legitimate agreement for both parties.

Pedagogical Objectives:
. Negotiating M&A and one-shot transactions in a win-win way . The difference between win-lose bargaining and win-win value claiming . The use of process to maximize value claiming . Using legitimacy, justice and fairness to claim value, while avoiding concessions

Keywords:
Negotiating M&a, Start-Up and Entrepreneurship, Legitimacy, Fairness and Justice, X-Cultural Differences, Bargaining and Value Claiming, Communication and Process, First Offer and Counteroffer, Concessions

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published: 24 Mar 2016

  • Topic: Economics & Finance
  • Region: Global

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Abstract:
A multi-issue 1-on-1 negotiation between an aging Italian entrepreneur in North Africa (Luca Lombardi) and a young M&A specialist from a large Asian corporation (Anna Chuan). All the due diligence has been completed and the parties are now ready to discuss the price for the Lombardi company. Role-players can either fall into bargaining (an exchange of numbers) since their ideas of what the company is worth are completely at odds, or discuss the assumptions behind their numbers and valuations to reach a legitimate agreement for both parties.

Pedagogical Objectives:
. Negotiating M&A and one-shot transactions in a win-win way . The difference between win-lose bargaining and win-win value claiming . The use of process to maximize value claiming . Using legitimacy, justice and fairness to claim value, while avoiding concessions

Keywords:
Negotiating M&a, Start-Up and Entrepreneurship, Legitimacy, Fairness and Justice, X-Cultural Differences, Bargaining and Value Claiming, Communication and Process, First Offer and Counteroffer, Concessions

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published: 24 Mar 2016

  • Topic: Economics & Finance
  • Region: Europe

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Abstract:
The case describes the historical evolution of the European Union and the role and powers of its decision-making organs. It surveys the growing number of crises - relating to the Eurozone, the Ukraine conflict, mass migration from Syria and other non-member countries, and 'Brexit' (the possibility of British withdrawal) - that it has had to confront during the last few years and asks whether the EU will survive these crises or begin to disintegrate.

Pedagogical Objectives:
The case provides a basis for an informed discussion and analysis of the forces that have driven the process of European political integration, the process by which the EU makes decisions, the key actors in this process, the roots, nature and scope of the crises it is currently confronting, whether the EU will continue to integrate or start to disintegrate, and what the implications of such potential scenarios might be.

Keywords:
European Union, Eurozone, Brexit, Ukraine, Schengen, Migration, (dis)integration, Crisis

published: 25 Jan 2016

  • Topic: Economics & Finance
  • Industry: Automobile
  • Region: North America

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Abstract:
In 2008-09, Toyota Motor Corp. became engulfed in a perfect storm: oil prices spiked, the global financial crisis brought car loans to a halt, the dollar tanked against the yen, and millions of Toyota vehicles in North America were recalled. Toyota posted its first ever loss since 1950. The case describes how Akio Toyoda, scion of the dynasty behind the Toyota empire, ascended to the top job in 2009, and turned the struggling carmaker around. It also tells the story of the Toyoda family, whose 8% ownership stake has enabled it to maintain control of one of the world’s most successful companies and steer it through one of the most difficult periods in its history.

Pedagogical Objectives:
The case highlights the role of a powerful Japanese dynasty in managing a global multinational company for nearly 80 years, in particular how the heir single-handedly restored the company values and legacy at a crucial moment in its history. It offers an opportunity to discuss the role of professional managers who are vital for the sustainability of family-run enterprises. The case encourages students to view global companies such as Ford, Fiat and VW as more than industrial giants but as family-run businesses, each with a different approach to management.

Keywords:
Toyota Motor, Family Business, Akio Toyoda, Salaryman, Automobile Industry, Saylor Family, Japanese Carmaker, Recall Crisis, Corporate Governance, Value Creation, Strategy and Implementation, Wicfe,

published: 17 Nov 2015

  • Topic: Economics & Finance
  • Industry: Toys
  • Region: Asia

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Abstract:
Great Eastern Toys (B) As part of its growth strategy, a new product has been designed and a study carried out by a consultant to estimate the market potential and the investment required to put it into production. The analysis calls for an estimation of the relevant cash flows from the project raising questions such as measuring opportunity costs, evaluation of sunk costs and joint costs, the impact of the new product eroding sales from existing products - typical problems arising when making capital investments. Since the investment project extends over several years, a DCF analysis is necessary. Discussion needs a full class session.

Keywords:
Financial Analysis, Working Capital Management, Investment Appraisal, Valuation of a Company, Currency Risk Management

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published: 21 Aug 2015

  • Topic: Economics & Finance
  • Industry: Crude Petroleum and Natural Gas
  • Region: Global

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Abstract:
This exercise uses monthly data for the US from 1978-2013 to estimate a demand function for gasoline in the US. The demand function is used to calculate the price and income elasticity of demand. Subsequently, it shows how to estimate elasticities in the short and the long run.

Pedagogical Objectives:
First, to teach the concept of elasticity by showing that elasticity of demand can be estimated using data and regression analyses. Second, to use these concepts to explain why oil prices tend to be so volatile in the short run. Students use the data and built-in regression functions in Excel (file available on request) to estimate elasticity of demand for gasoline. Next, they estimate short and long-run elasticities to see that demand is much more price-inelastic in the short run. The exercise is useful for both MBA students and for students in an intermediate Microeconomics course.

published: 29 Jun 2015

  • Topic: Economics & Finance
  • Industry: Transport
  • Region: Asia

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Abstract:
In 2013, the long-delayed IPO of the Bangkok Mass Transit System Public Co. Ltd. (BTSC) took place, but in an unusually complex form. Instead of selling the shares of the company that owned the elevated railway concession, what was offered were investment units in Thailand’s first publicly listed infrastructure mutual fund: the BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF). Proceeds from the IPO were used to acquire from BTSC the rights to the net farebox revenue generated from the railway. The investment exposed investors not only to the operating risk of the railway but to other types such as political risk.

Pedagogical Objectives:
To discuss the complexity of BTSC’s fund raising via BTSGIF and, more generally, the valuation of projects with political risks. Instead of a simple IPO of BTSC, the case looks at the more complicated contractual relationships between BTSG, BTSC and BTSGIF, why such a method of fund raising was chosen, and the pros and cons for the various parties. It also raises issues about investing in infrastructure trusts, particularly in politically volatile emerging markets.

Keywords:
Ipo, Concession, Infrastructure, Political Risk, Railway, Public-Private Partnership (ppp), Infrastructure Fund

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