Case Study-AW61

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Case: Empresas Polar vs. Bavaria, S.A.:
 

Acquisition of minority blocks of Backus & Johnston’s voting stock.
 

Case Questions
 

Note: Questions should be answered from the perspective of an Investment Bank advising the Peruvian Conies, i.e. an independent and objective party.
 

1. (a) Do a DCF of Backus. Spell out your assumptions about the company, the industry and Peru. In addition to assumptions about the growth of beer demand in Peru, you will need to use information about price and income elasticity’s to make your projections.
 

(b) Can you think of an alternative way to value Backus based on the information of the case? Explain how you would do it, what the value would be and how it would differ from the DCF results.
 
1. Based on your valuations, can you make sense of the market price of Class A shares? Is that price the right one? How could you make sense of that price compared to the price of your valuation?
 
1. The value of Class A shares and Class I shares differs. How would you explain this difference? Provide corporate governance reasons and also consider the impact of the level of efficiency of stock markets in emerging countries.
 
1. The report commissioned by Polar argues that “premiums of 30%-50% are typically paid for control of a company and substantially smaller premiums are paid for acquisitions of minority blocks.” In your opinion, is the premium on Class A shares paid by Bavaria and Cisneros a “premium for control” that reflects an act of collusion on the part of these two firms, as the report seems to suggest? Are there any corporate governance reasons that could justify this premium if it is not a premium for control of the firm?
 
1. Besides the corporate governance reasons that you have thought of in questions 3 and 4, what other reasons could Bavaria or Cisneros have for paying such a high premium?
 
University of Maine System Budget Analysis, 2003-2013
 
The exercise is designed to immerse you in doing budget analysis. Besides the obvious relevance of the university budget to you as students, I’ve developed this exercise so you could work with finances for an organization that depends on charges for services (a.k.a., tuition and fees).
 
In other words, the University of Maine System is more like a business or nonprofit organization than a tax-funded government organization. Although public universities receive part of their funding from governments, they actually are businesses and use a business model to determine how much they should charge for services. Later in the course we will look at “break-even analysis”, a cost
and financial analysis strategy used by businesses to determine how much they must charge for services or goods in order to “break even”, which means to simply cover costs, with no profit.
 

Scenario
 
For this exercise you will be assuming the role of a consulting budget analyst hired to assist the hypothetical organization “Good Jobs for Maine Graduates.” ‘Good Jobs” believes the state needs a high quality university system that is accessible to all students. Governor Lepage recently announced that he would increase funding for the UM System so that tuition rates could remain frozen.
 
By doing this, he and the Maine Legislature are subsidizing the “price” students must pay to attend UMS campuses. While “Good Jobs” applauds the State’s efforts to maintain tuition at a reasonable level, they have heard from many students that tuition is too high and that students are bearing a
larger share of costs than they feel is appropriate.
 
“Good Jobs” is ready to lobby the Legislature for more funding for public higher education. They plan to argue that good jobs will only come to Maine if employees know there will be a steady stream of well-educated students emerging from the University System. In their view, this means the State of Maine needs to make a strong commitment to financing the University System.
 
Elizabeth Getjobz, the Executive Director of “Good Jobs”, recently read the NACUBO report on budget trends in public universities, so she has asked you to look at UMS finances from 2003 through 2013.
 
You can read more about our case study assignment help services here.
 

 

Doing the Number Crunching and Analysis
 
You will analyze the 2003 and 2013 budgets for the UMS and prepare a report for Elizabeth Getjobz and the Board of Directors of “Good Jobs for Maine Graduates.” The data you will analyze is taken from audited UMS Financial Reports. Hence, the amounts represent “actual” rather than hoped-for revenues and planned spending.
 
I have prepared an Excel template that shows revenues and expenditures for the UMS for 2003 and 2013. The UMS budget worksheet template is set up to facilitate your number-crunching and to guide your analyses. I also have entered some formulas to get you started.
 

I suggest that you print out the template so you can see what you are doing. After you do the calculations, print out the completed template and analyze what you see.
 
Writing Your Briefing
 
Your tone should reflect enthusiast professionalism and convey a sense that you care about the UMS budget, while nonetheless remaining objective. Naturally, your briefing will be succinct, without sacrificing quality or important information in pursuit of brevity. The briefing will be written clearly, in an easy to read format, and crafted to enlighten without trying to explain “why” things look like they do (which would be your opinion).
 
º Use bullets in an outline format to make your points, not in a paragraph format.
º Papers should be spaced at 1.25 and be no more than 3 pages in length.
 

Some Thoughts About This Assignment
 
My advice: Put in the time needed to write an excellent, effective briefing.
 
1) Think of this analysis as detective work & it will be fun!
 
2) Don’t isolate this work from your other LOS studies, thinking you’ll never do “budgeting” as a job. Leaders need to be able to work with budgets and maximize resources. Also, this work is very similar to an analysis you might do in public, private, and nonprofit organizations. The revenue and expense categories will be different, or you might be looking at trends in enrollment by campus, clients by type, employment by sector, or many other analytical scenarios involving trends in components of a whole.
 
3) Take the time to write succinctly and clearly. A number of historical figures are credited with saying: “I would have written a shorter letter if I’d had more time”. While the jury is out on the exact author, it appears likely that the original was written in French by Blaise Pascal. You can check out what the “Quote Investigator” has to say at this web site:
 

Regardless of the source, there is no question that writing succinctly and effectively requires effort. Why should you work to hone your writing? Graduates of Leadership & Organizational Studies often are asked for writing samples, either by prospective employers or when they apply for graduate programs. This budget analysis briefing makes an exceptionally good sample, when done well.
 

Taking the time to produce a top quality product not only will advance your learning and your course grade, it will give you a work product to show a prospective employer what you can do. Also, I do a lot of reference checks, so showing me you can analyze and write gives me great information to share with someone who is thinking about hiring you.
 
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