Case Questions(1) (1)

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  Case QuestionsQuestions are provided to help facilitate understanding of the case. A one page (maximum 1.5 page, if necessary) response to each set of case questions must e posted in !lac oard prior to the class in #hich the case #ill e discussed (see $yllaus). Questions should e ans#ered on an individual asis, #ithout discussion #ith other students. %nvestment !an ing in &'' (!) A !rave *e# +orld 1. Why were proponents of deregulation so successful in the late 1990s? How much can weblame deregulation for the meltdown in the investment banking industry, and how could thegovernment have foreseen andor stopped the domino e!ect before the crisis of 00#? . $ould any one of the investment banks have remained competitive without following theindustry trend of taking on increasing amounts of leverage to boost returns on investment? %f so, how?&. Why was 'ehman (rothers allowed to collapse while (ear )tearns was not?*. +id the compensation structure of the investment banking industry encourage bankingeecutives and employees to take on ecessive risk to boost short-term prots? Why or whynot?/. How much of the industry-wide crisis stemmed from the investment banks nancials and thecurrent economic climate as opposed to investor panic and speculation?. (oth (ear and 'ehman bailed out their proprietary hedge funds. +id they have any otheroption? What would have happened had they not done so?2. $ould 3organ )tanley and 4oldman )achs have survived without becoming bank holding  companies? What were the benets and disadvantages of becoming bank holding companies?What does designation as bank holding companies mean for the way 3organ and 4oldmanoperate going forward? reeport-co/an inancing an Acquisition 1. Why do you think 563organ and 3errill 'ynch were selected to underwrite and book-run all7 &.& billion in nancings 8all debt, common stock, and convertible, instead of sharing theunderwriting with additional rms? . What was the role of the leveraged nance group at 563organ and why was its involvementimportant to the ac:uisition?&. +escribe the forms of risk that an investment bank must consider in relation to ac:uisition andunderwriting transactions. +escribe what it means for a rm to set aside capital when itcompletes underwriting transactions.*. +escribe the role and importance of credit rating agencies in the ;reeport-3c3o<antransaction. Which group within an investment bank has the primary responsibility to work withcompanies regarding rating agency considerations?/. +escribe the role of e:uity research at 563organ in the transaction. How has the role of e:uity research changed since 00&?. Who are the clients of the institutional sales team at 563organ? What is meant bya =limitorder,> and what is its impact on the sales function? +escribe the role of an :uity $apital3arkets )yndicate group.2. @ssume the following fees were paidA 3B@ fee of 0./ percent of the transaction valueC debtfees of 0.2/ percent on all debt and loan nancingC e:uity fees of & percent on all e:uity andconvertible nancing. $alculate the estimated total fees for both 563organ and 3errill 'ynch.%ndicate whether you think these fees were Dustied and support your views.  0he !est eal 2illette Could 2et3 4roctor  2amle6s Acquisition of 2illette 1.What were the possible synergies and forces propelling the merger between 6B4 and 4illetteEas well as the history of other takeover attempts for 4illette? . %n light of 4illettes large increase in value during 5ames Filtss tenure, was his compensation reasonable? Was his pay package in the best interest of shareholders?&. valuate the 6B4 o!er. 3ake a list of the positive and negative aspects of receiving shares or cash from both the perspective of 6B4 and 4illette shareholders.*. $ompare the valuation analyses in $ase hibits  and 2 8dition 1 of tetbook, or ;igures $*.* and $*./ 8dition of tetbook. Why are they di!erent? )upport and defend the validity of using each valuation method . /. +iscuss the conGicts of interest for the investment bank in an 3B@ transaction where the same rm that writes the fairness opinion in support of the deal stands tobe paid a large fee if the transaction is completed. 6. Should investment bankers and companies spend their time appeasing politicians worried about theeffects of possible mergers? Are politicians representing the interests of the American public when theyquestion the merits of a deal? Also evaluate the role played by federal and international regulators. Isthere any better solution to the complicated regulatory process? 2. valuate the role played by Warren (u!ett in the merger. )hould the support of one investor be a deciding factor in the completion of an 3B@ transaction? H.J. Heinz M&A 1. +escribe the activities of elson 6eltI and the role played in laying the groundwork for the ac:uisition by (erkshire Hathaway and &4. . +iscuss the positions of various stakeholders, including HeinI shareholders, management, employees, and citiIens of 6ittsburg.&. +iscuss the go-shop process, why it may be necessary, and risks associated with this process.*. Why were so many investment bankers involved in this transaction, and what were their respective roles?/. What was the ac:uisition premium? Was this reasonable?. Why did this transaction propose Iero synergies? +iscuss and :uantify potential synergies that could be realiIed, including where they come from, the period of timeover which they can be realiIed, and :uantify the impact on enterprise valuation.  2. What was the market reaction to the ac:uisition announcement, including share price and e:uity analyst commentary? Kmart, Sears and ESL: How a Hedge Fund Became one of the World’s Largest Retailers 1. escribe recent trends in the hedge fund and private equity industry and the growing overlap betweenthe two.!. Analy e different issues surrounding a purchase by a financial or strategic buyer and their respectivestrengths and weaknesses. #. $rovide a brief historical background of the problems facing %mart and the characteristics of thedistressed debt market& including factors that influence an investment in a distressed company.'. (ompare %mart)s financials before and after bankruptcy *see (ase +,hibit 6-. . iscuss the causal events facilitating the acquisition of Sears. (ould Sears have succeeded as astandalone retailer? 6. +valuate /ampert)s strategy and the benefits for Sears)s shareholders. .
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