ASSIGNMENT SHEET

TUESDAY, JANUARY 17, 2012
CLASS 1– INTRODUCTION AND GOALS FOR THE SEMESTER

A. CLASS LECTURE

1.Review of Topics, Assignment Sheets, and Course Outline

2.The Case Method - Rules for Classroom Discussion

3.Instruction for the Formation of Study & Project Groups

B. Professor/Student Introductions

C. Readings from Course Packet:

  1. Fin 394.4 Syllabus - Course Outline and Grading Policy
  2. “Course Introduction”
  3. Note to the Student: How to Study and Discuss Cases
  4. “The Case Method” - Jeff Sandefer
  5. “Classroom Discussion” - Jeff Sandefer
  6. “Note on Study Groups” -Jeff Sandefer

ASSIGNMENT:

  1. PURCHASE THE COURSE PACKET
  1. BRING YOUR RESUME TO THE NEXT CLASS
  1. BROWSE THE CLASS BLACKBOARD SITE: ( AND LOOK AT THE EXTERNAL LINKS AND COURSE DOCUMENTS POSTED.
  1. Case Exhibits
  2. Case Solutions
  3. Valuation Templates
  4. Valuation External Links
  5. Project Information

ASSIGNMENT SHEET

THURSDAY, JANUARY 19, 2012

CLASS 2 – WORK FOR MONEY OR MONEY WORK FOR YOU?
  1. Turn in Resume
  1. Formstudy groups (self-select 4-6 people with different education, concentration, work experience and cultural background). Send e-mail to the professor with team member’s names. Study teams members must be in same section of the class.
  1. If you plan to do a consulting project, then start forming a team of four (4) members and looking for a privately held company to analyze. Members can be different than your study team and can be in the other section of the class.
  1. CLASS LECTURE

1. Definition of Small Business

2. Importance of Small Business to US Economy

3. Differences in Small and Large Businesses

4. Business Archetypes

  1. READINGS FROM THE COURSE PACKET:
  1. The Questions Every Entrepreneur Must Answer
  2. Small Company Finance: What the Books Don't Say
  3. A Small Business is Not Just a Little Big Business

Blackboard: Overview of Small Business.PPT

ASSIGNMENT: For Class Discussion Next Class

  1. The MBA degree is designed for you to work as a manager for a large organization. Think about how you might use your MBA skills to start or buy a business. Hopefully it would be in an area for which you really have a passion and can make money as well. What type of skill sets (education, work experience, domain expertise, etc.) do you need to be an owner/manager?
  2. What type of industry would you choose? Prepare to give an elevator pitch on your business idea for the next class.

ASSIGNMENT SHEET

TUESDAY, JANUARY 24, 2012

CLASS 3 – START, BUY, FRANCHISE OR FAMILY BUSINESS
  1. Class Lecture:
  1. Creating Wealth vs. Managing Wealth
  2. Rewards and Sacrifices of Self-Employment
  3. Starting vs. Buying a business
  4. Franchises
  5. Family businesses
  1. CLASS DISCUSSION:

ELEVATOR PITCH - YOUR PERFECT BUSINESS TO OWN AND OPERATE. BE PREPARED TO GIVE A 1 MINUTE OVERVIEW OF HOW YOU WOULD USE YOUR MBA TO BECOME SELF EMPLOYED.

  1. READINGS FROM THE COURSE PACKET:
  1. A NOTE ON FRANCHISING
  2. ENTREPRENEUR: HOW TO BUY A BUSINESS
  3. HOW VENTURE CAPITALISTS EVALUATE POTENTIAL VENTURE OPPORTUNITIES
  1. BLACKBOARD: ENTREPRENEURSHIP.PPT
  1. ASSIGNMENT:

Make sure you are on a study team as your first case discussion is next class.

ASSIGNMENT SHEET

THURSDAY, JANUARY 26, 2012

CLASS 4 – ALL IN THE FAMILY

ASSIGNMENT:

A. CASE:

1. COLETEK, INC. SB-144

B. READING:

  1. Transferring Power in the Family Business HBR 79401
  2. Definitions & Typologies of Family Business

C. STUDY QUESTIONS:

  1. Should Alan Cole sell ColeTek or hire new management?
  1. What’s the lowest price you would accept if you were Alan?
  1. If you were Paul or Brian, would you buy at that price and what terms would you build into the agreement?
  1. How could this situation have been avoided? (Be specific.)
  1. How would you value Brian and Paul’s new business? What is their unproven technology worth? What are ColeTek’s patents and distributor network worth?

D. BLACKBOARD: SUCCESSION PLANNING.PPT

ASSIGNMENT SHEET

TUESDAY, JANUARY 31, 2012

CLASS 5 – LEGAL FORMS OF ORGANIZATION

A.CLASS LECTURE:

  1. Tax vs. Liability Issues
  2. Type of Investor
  3. Legal Forms:
  4. Sole Proprietorship
  5. General and Limited Partnership
  6. Limited Liability Companies
  7. S and C Corporations
  8. Section 1244 and 1202 Stock

B.READINGS FROM THE COURSE PACKET:

  1. Organizing the Enterprise: Which Form is Best for You?

C.ASSIGNMENT: None

D.BLACKBOARD: LEGAL FORMS.PPT

ASSIGNMENT SHEET

THURSDAY, FEBRUARY 2, 2012

CLASS 6–FOUNDER CHOICES
  1. CLASS LECTURE:
  1. Bootstrapping
  2. Equity Splits
  3. Roles and Board of Directors
  4. Rich vs. King Decision
  5. Persistence vs. Exit
  1. CASE:
  1. LATHER, RINSE, REPEAT: Feedburner’s Serial Founding Team
  1. Study Questions:
  1. What mistakes did Costolo and his partners make in the three ventures that preceded FeedBurner? Founding team decisions? Hiring Decisions? Financing Decisions?
  1. Have they made the same mistakes with FeedBurner? What lessons did they learn from the previous companies?
  1. What should Costolo do now: take the Google offer or the “C” round of funding from the VCs?
  1. What are the trade-off between control and maximizing value?

READINGS FROM THE COURSE PACKET:

  1. Bootstrap Finance: the art of start-ups

ASSIGNMENT SHEET

TUESDAY, FEBRUARY 7, 2012

CLASS 7 –A BIG PIECE OF A SMALL PIE
OR A SMALL PIECE OF A LARGE PIE?

CLASS LECTURE: FINANCING A BUYOUT

  1. Debt vs. Equity
  2. Control vs. Risk

CASE: Clarion Optical Co. HBS 9-393-116

STUDY QUESTIONS:

  1. Should Cyrus Atkins sell Clarion Optical? Would you buy it if you were Stone or Randall? Why or why not?
  1. What is the company worth? To Cyrus? To Stone and Randall?
  1. How much ownership in the company should Randall and Stone have?
  1. Who owns the intellectual property and how would you value it?
  1. How should the deal be structured? Which financing alternative would you select and why?

READINGS FROM THE COURSE PACKET:

  1. Why Entrepreneurs Don’t scale
  2. Note on the financial perspective: What every entrepreneur should know

ASSIGNMENT SHEET

THURSDAY, FEBRUARY 9, 2012

CLASS 8 – measuring business performance

CLASS LECTURE: Financial Statement Analysis

  1. DuPont Analysis
  2. Breakeven Analysis

CASE: NONE

READINGS FROM THE COURSE PACKET:

  1. Note on Unit Economics
  2. Breakeven Analysis & Operating Leverage

ASSIGNMENT: Prepare the Match the Industry case and turn in at the beginning of next class (individual assignment). Match the industry with the column financial data and guess which company represents the industry. Give a brief explanation of what characteristics you were looking for in matching the industry. All data is from 2010.

BlackBoard:

  1. Financial Statement Analysis.ppt

ASSIGNMENT SHEET

TUESDAY, FEBRUARY 14, 2012

CLASS 9 – FINANCIAL STRATEGIES

CLASS LECTURE: FINANCIAL STRATEGIES

  1. DUPONT Analysis
  2. Benchmarking

CASE: Match the Industry Case

This is an individual effort to be turned in at the beginning of this class. Fill out the table matching the industry with the column of financial data. Try to guess the name of the company representing the industry. Give a brief explanation of why you matched each industry with the financial characteristics and ratios shown in the case exhibit. Deliverable should be no longer than 2 pages.

Study Questions:

Every industry and company will have some unique financial characteristics. Use your knowledge of the industry to match up the financial characteristics with the ten columns of common sized financial statements and ratios shown in the exhibits. Group the industries that would have R&D expense. Group other industries that would be inventory dependent. Group other industries that might be capital intensive with lots of fixed assets and debt levels. Other industries might have high margins and rates of return. Some industries might have goodwill as a result of industry consolidation. Once you have them in buckets, try to pick out unique industry features that might reveal themselves in the financial data.

READINGS FROM THE COURSE PACKET:

  1. assessing the Firm’s future financial health
  2. Measuring Business Performance

BlackBoard:

  1. Financial Statement Analysis.ppt
  2. Breakeven Analysis.ppt

ASSIGNMENT SHEET

THURSDAY, FEBRUARY 16, 2012

CLASS 10 –GROWTH CAN KILL

A.LECTURE: WORKING CAPITAL MANAGEMENT

  1. Cash Conversion Cycle
  2. Percent of Sales Method of Asset Forecasting

B. CASE:

  1. Butler Lumber Company
  1. STUDY QUESTIONS: Attached to case
  1. READINGS FROM THE COURSE PACKET:
  1. Cash Management Practices in Small Companies
  2. Note on Managing the growing venture
  3. Five Stages of Small Business Growth
  1. ASSIGNMENT: hANDOUT OF THE TAKE HOME EXAM DUE IN ONE WEEK (Individual effort, open book and notes )
  1. BlackBoard:
  1. Working Capital Management.ppt
  2. Asset Forecasting.ppt

ASSIGNMENT SHEET

TUESDAY, FEBRUARY 21, 2012

CLASS 11 –WHAT’S IT WORTH?

.

CLASS LECTURE: BUSINESS VALUATION REVIEW

  1. Precedent Transactions
  2. Guideline Public Companies
  3. DCF Models
  4. LBO Models

CASE: NONE.

READINGS FROM THE COURSE PACKET:

  1. Note on Valuing Private Businesses
  2. Corporate valuation and market multiples

BlackBoard:

  1. Business Valuation.ppt

ASSIGNMENT SHEET

THURSDAY, FEBRUARY 23, 2012

CLASS 12 – INTRINSIC VALUE – DCF MODELS

TURN IN: TAKE HOME EXAM

CLASS LECTURE: BUSINESS VALUATION REVIEW

  1. Estimating Cash Flows and Terminal Value
  2. Choosing the discount rate
  3. CAPM, BUM, Total Beta
  4. Discounts for Lack of Control, Marketability

CASE: NONE.

READINGS FROM THE COURSE PACKET:

  1. note on cash flow valuation methods: comparison of WACC, FTE, CCF and APV Approaches
  2. Note on Valuing Control and Liquidity in Family and Closely Held Firms
  3. Quantitative Support for Discounts for Lack of Marketability

BlackBoard:

  1. Business Valuation.ppt

Assignment: MIDTERM CASE WILL BE DISTRIBUTED THIS CLASS. DUE NEXT THURSDAY, MARCH 1ST.

One week from today, each student will submit a written case analysis at the beginning of class. Your work on the midterm case should be an individual effort. Your analysis should be word processed and double spaced with at least a 12-point font. Your analysis and spreadsheet work should not exceed 10 pages. Do not put your name on the front of your analysis as I grade it blindly. Put your name on the back of the last page and staple. Discussing the case with other students in this or other classes is a violation of the honor code. Going out on the web to find out what happened to the company is also a violation of the honor code. You should stay within the case facts and just list your assumptions.

ASSIGNMENT SHEET

TUESDAY, FEBRUARY 28, 2012

CLASS 13 – D-I-V-O-R-C-E – What’s Your Bid?

LECTURE:

  1. BUY-SELL TRIGGERED TRANSACTIONS
  2. NORMALIZING THE FINANCIAL DATA

CASE:

  1. The Carlton Polish Company

STUDY QUESTIONS:

  1. What, if anything, should Carlton bid?
  2. What other factors other than price should Carlton consider?
  3. What do you think of the opportunity and the company’s future?
  4. Are you comfortable with the financing plan? Why or why not?

Reading from the Course Packet:

  1. THE COMPANY SALE PROCESS

ASSIGNMENT SHEET

THURSDAY, MARCH 1, 2012

CLASS 14–SHOW ME THE MONEY!
SOURCES OF CAPITAL

TURN IN: TURN IN YOUR 10 PAGE WRITTEN ANALYSIS AND RETURN THE CASE AT THE BEGINNING OF CLASS. YOUR NAME AND CLASS TIME SHOULD BE ON THE BACK OF THE LAST PAGE OF YOUR ANALYSIS.

CLASS LECTURE: Financing the Transaction

Sources of Capital/Private Equity

  1. Debt Sources
  2. Equity Sources
  3. Government Backed Programs

CASE: None

READINGS:

  1. Note on Angel Investing
  2. Note on Private Equity Deal Structures

BlackBoard:

  1. Sources of Capital.ppt
  2. Terms Sheets.ppt
  3. History of Private Equity.ppt
  4. Private Equity Glossary.pdf

THERE WILL BE NO CLASS DURING GLOBAL PLUS AND SPRING BREAK (MARCH 6 – MARCH 15). Project teams should work on their consulting projects and other students should catch up on their readings in the course packet.

ASSIGNMENT SHEET

TUESDAY, MARCH 20, 2012

CLASS 15 – CAPITAL STRUCTURE THEORY

CLASS LECTURE: FINANCING THE COMPANY

  1. Capital Structure Theory

CASE: NONE

READINGS FROM THE COURSE PACKET:

  1. Note on the Theory of Optimum Capital Structure
  2. A Managerial Primer on the U.S. Bankruptcy Code
  3. Indifference Point Analysis

BlackBoard:

  1. Capital Structure.ppt

Assignment: Look at the following Websites That will help you with your project:

  1. – use your user name and password to look at the database for public companies and transactions
  2. - Look at the valuation datasets and excel models

Send me your consulting project company’s SIC or NASIC and I will send you excel files on comparable transactions.

ASSIGNMENT SHEET

THURSDAY, MARCH 22, 2012

CLASS 16 – GREED VS FEAR

CLASS LECTURE: Making the Hard Choice

  1. When is the right time to exit?
  2. Exit now or take capital and grow?

CASE: TICKLE

STUDY QUESTIONS:

  1. If you were Currier, which option would you choose? Why?
  2. Option 1- Big Round of VC and prepare for an IPO?
  3. Option 2- Sell Tickle (Emode) to Monster.com
  4. Option 3- Do neither and focus on operations- Pursue social networking with existing cash and internally generated funds.
  1. Rationalize the $92 million offer from Monster.com based on 4x trailing revenues. How comfortable would you be with terms including Monster.com stock and an earnout?
  1. What are the pros and cons of taking the $62 million pre-money ($82 million post-money) valuation from the VCs?
  1. Which options do you think August Capital and the other shareholders would prefer? Why?

READINGS FROM THE COURSE PACKET:

  1. Note on Employee Stock Ownership Plans and Phantom Stock Plans
  2. Note on Valuation of Venture Capital Deals

ASSIGNMENT SHEET

TUESDAY, MARCH 27, 2012

CLASS 17 – JUST A MATTER OF TAXES

LECTURE: LEVERAGE BUYOUTS

  1. Majority Recapitalizations

CASE: Brazos Partners: the CoMark LBO 9-202-090

STUDY QUESTIONS:

  1. Do you agree with the $40 million purchase price?
  1. What is the purpose of the earnout? If you were the seller, would you accept a subordinated note from the buyers? Why or why not?
  1. If you were an intermediary, how would you negotiate the issue of whether the transaction should be an asset sale or stock sale?
  1. What value does Brazos bring to the sellers?

Readings in the Course Packet:

  1. Technical Note on LBO Valuation (A)
  2. Technical Note on LBO Valuation (B)

ASSIGNMENT: Try doing a reverse induction method as shown in the readings.

ASSIGNMENT SHEET

THURSDAY, MARCH 29, 2012

CLASS 18 – IS THIS A “BUBBLE”?

LECTURE: CROSS BORDER VALUATIONS

  1. Political Risks, Currency Risks, Repatriation Risks

CASE:Mandic BBS – An Entrepreneurial Harvesting Decision

STUDY QUESTIONS:

  1. What are the valuation challenges in international, cross-border valuations?
  1. Which partner is the best to accomplishing Mandic BBS's long-term goals?
  1. How much is Mandic BBS worth? How do you balance the risk vs. the growth opportunities?
  1. Is taking the highest bid the best alternative for all of the stakeholders? How much influence will GP exert in this decision?

Readings from the Course Packet:

  1. Valuing Cash Flows in an International Context

ASSIGNMENT SHEET

TUESDAY, APRIL 3, 2012

CLASS 19 – DIVERGENCE OF GOALS – PE Exits

CLASS LECTURE: Private Equity Exits

  1. M&A vs. IPO

CASE: ELLER MEDIA S-SB-101

STUDY QUESTIONS:

  1. Should Eller Media launch an IPO or sell to Clear Channel?
  1. Why has the company been so successful? Would you have backed Karl Eller?
  1. What industry ‘rules of thumb’ for valuations might billboard companies use to value themselves?
  1. Relate Eller Media’s financial strategy to the DuPont analysis decomposition of ROE.
  1. How much is Eller Media worth and which option do you think each of the stakeholders will support?

READINGS FROM THE COURSE PACKET:

1.A Note on Exits

2.A Note on the initial public offering process

ASSIGNMENT SHEET

THURSDAY, APRIL 5, 2012

CLASS 20–ROLLING, ROLLING, ROLLING…ROLL-UP

CLASS LECTURE: ROLL-UPS (CONSOLIDATIONS)

  1. Poof vs. Buy & Build Strategy

CASE: Project “Dial-Tone” HBS 9-897-003

STUDY QUESTIONS:

1. What industry characteristics are favorable for roll-ups?

2. What are the characteristics of these three companies that make a roll-up attractive?

3. What does each of the players bring to the table? Can you still do the roll-up if all three companies do not agree to be acquired? Why or why not?

4. What should Hellman do?

Reading in the Course Packet:

  1. The Consolidation of Highly Fragmented Service Industries: Rollups
  2. Accounting For Business Combinations: Purchase Method

ASSIGNMENT SHEET

TUESDAY, APRIL 10, 2012

CLASS 21– CHANGING OF THE GUARD (MBO)

LECTURE: MANAGEMENT BUYOUTS

  1. Financing and Deal Structure

CASE: John M. Case Company

STUDY QUESITONS:

  1. What price should the managers offer?
  1. As the owner, would you accept this price or put the company up for auction?
  1. What are the Key Success Factors (KSF’s) for the company?
  1. What is the NPV of the diversification strategy and how key is it to their future plans?
  1. Can the managers put together a deal structure that meets their goals?

Readings from the Course Packet:

  1. A Note on Leveraged Buyouts

ASSIGNMENT SHEET

THURSDAY, APRIL 12. 2012

CLASS 22 – USING YOUR STOCK AS CURRENCY – EXCHANGE RATES

LECTURE: M&A BASICS

  1. ACCRETION/DILUTION ANALYSIS
  2. EXCHANGE RATES
  3. FORECASTING AND SHARING SYNERGIES

CASE:

Automated Intelligence Corp.

READING FROM THE COURSE PACKET:

  1. A Note on Mergers and Acquisitions and Valuation
  2. Evaluating M&A Deals – Equity Consideration

STUDY QUESTIONS:

  1. See Study Questions at the End of the Case.
  2. What are AIC’s expectations of value and what do they believe they are bringing to the table? What does PCI bring to the table?
  1. What would be the maximum number of shares of PCI that AIC can expect to get in exchange for their shares?
  1. Would your exchange rate be accretive or dilutive to the shareholders of PCI?

BLACKBOARD: MERGERS & ACQUISITIONS.PPT