CHINA/US - Technology Transfer and Compensation Trade - Changchun Pepsi - Management Assignment Help

Internal Code  : 3HCB

Management Assignment Help

Case 1:  FIRESTONE COMPENSATION TRADE

1. Name: Firestone Tire and Rubber
2. Size of Project: US$ 30 million per Technology Transfer
3. Project Type: Technology Transfer, Compensation Trade (see diagrams attached)
4. Location: ideally, throughout China
5. Background: Firestone wanted to sell its slightly dated radial tire technology to China. [The technology was not the most current in the US or Japan, but was current and appropriate technology for China and for Southeast Asia and Africa.] Its concept was to sell the same technology several times in China, to each of the major tire manufacturers. The Chinese party was asked to pay US$30 million cash at the outset of each Tech Transfer. As an inducement, Firestone was willing to agree to buy back each year a certain volume of tires that met international standard, so as to provide the Chinese party with a market and a source of hard currency to recover the initial US$30 million outlay.

Firestone organized a team of only two individuals who were sent to China for 12 months to complete these sales. One was a senior VP of technology, who knew the radial tire technology very well. The other was a senior VP of marketing, who was experienced at selling and contract negotiations. You have been hired as a highly paid consultant to Firestone. You will meet the Firestone principals in their Hong Kong hotel room tonight. Task:  Principal Questions (your answers should be specific and detailed, taking up at least 30% of your study or presentation time.)

1. Buyer Profile. Name at least 6 key attributes (characteristics) of the Chinese buyer (£.g., large or small, technically advanced (3 years behind current Western technology) or technically deficient (30 years behind), State-Owned Enterprise (SOE) or privately owned, etc.). Explain your reasoning to Firestone.
2. The Firestone team is f1Y1ng to China from Hong Kong tomorrow morning. Which city should they fly to first and whom should they call on there first? Explain why to Firestone.

Other Questions 

3. Given that a single Ministry - the Ministry of Chemical Industry or MOCI - is responsible for all rubber products in China, was Firestone likely to be successful in selling the same technology Di.ore than once to "China, Inc."?
4. A principal concern of Firestone is protecting the confidentiality of the technology. What provisions can Firestone add to the sales contract or buyback contract that might help to ensure the confidentiality of the technology? (Think beyond a confidentiality provision.)
5. Firestone arranged U.S. E:ximbank fmancing to support this U.S. export. What differences would Firestone have encountered in the financing structure for a . sale to, for example, (i) a Province, (ii) a Municipality with provincial-level status, such as Shanghai municipality, and (iii) a smaller Municipality?
6. Please refer to the diagrams of compensation trade transactions in China. As Firestone, would you prefer the sale and the buyback to be in one contract, or two? Describe the likely nature of your buyback agreement: Would you prefer to be a buyer from or a sales agent of the Chinese technology purchaser? Please give reasons.
7. What does Firestone's experience suggest about the market in China?

Case: 2 ASIAN INVESTOR

1. Name: Asian Investor
2. Size of Project: US$ 70 million
3. Project Type: 90:10 EJV (Equity Joint Venture) in building materials
4. Location: Qingdao City, Shandong Province
5. Background:

The project was to build a single, world-class plant virtually identical to a recently completed plant in the foreign investor's home country. The national regulations are well known to everyone. Most Provinces and major cities have up to US$ 30 million approval authority. Projects US$ 30 million and above require national approval in Beijing (from MOFTEC, the Ministry of Foreign Trade and Economic Cooperation). However, the Qingdao authorities all the way up to the Mayor assured the foreign investor the City could approve the investment without Beijing's involvement, by making the paper approvals appear as 3 separate projects, or as 3 phases of one project. The reality was, this was one huge, indivisible plant with a single production line 500 meters long, from the furnace to the cutting and stacking process. Approval by Beijing would take one year, minimum, after City approval, which would take 30 days. Other competitors were beginning discussion in the Province. The regional domestic market could only support one such building materials plant. Task: 

• You have been hired as an experienced China advisor to the Asian Investor. What action would you recommend the foreign investor take in respect of securing approvals to build the plant? (Hint: Write down at least two commercial rewards and risks for each of the two main strategies, that is, (a) local approval only OR (b) local approval and then national approval. For each risk, how might it be mitigated or eliminated?)
• What actions did the foreign investor take in 1) Qingdao City (Hint: See attachments; look carefully at dates and amounts); and 2) in Beijing?(Hint: The "ministry" in charge of building materials at the national level at the time is called SABMI for the State Administration of Building Materials Industry. What question do you want to ask the industry Minister?)
• What have been the consequences of the foreign investor's strategy?
• What does this investor's experience suggest about the value of hiring MBAs and lawyers when doing business in China?

Case: 3  COMPENSATION TRADE (BARITE) [It is suggested that you draw a diagram for this trade finance transaction, labeling all boxes and connecting lines.] A U.S. BUYER wishes to purchase a mineral called barite (a.k.a.“drilling mud”—what is it used for?) from a PRC SUPPLIER and is willing to open an irrevocable commercial letter of credit in favour of PRC SUPPLIER for US$10 million. PRC SUPPLIER wants a US$1,000,000 cash advance to expand the mine and complete adequate storage and transportation facilities for delivery of the mineral. PRC SUPPLIER has proposed that the product will be sold to the U.S. BUYER at market rates, but that the payment for each shipment should be allocated in two portions: 75% to the PRC SUPPLIER and 25% to be paid to U.S. BUYER toward the reduction of the cash advance. At the rate of delivery agreed in the supply contract, the cash advance would be paid off over a 4-year period. Structuring the Advance Given the trade finance tools that you have learned, how might you go about structuring the cash advance? Consider the positive and negative factors of each of the following possibilities.

1. The cash advance could be made by BANK on behalf of U.S. BUYER, secured by a deposit made by U.S. BUYER at BANK. As the advance is reduced, the deposit could be reduced.
2. The cash advance could be made by BANK to PRC SUPPLIER on behalf of U.S. BUYER as a loan to U.S. BUYER. BANK would charge interest to U.S. BUYER.
3. The cash advance could be made by BANK to PRC SUPPLIER under the commercial letter of credit, using a specific trade finance “tool” or “technique”. What is the trade finance “tool” that should be used to effect the proposed cash advance under a letter of credit? Please be prepared to explain precisely how this would work, and which party would have the risk of non-repayment by the PRC SUPPLIER.

Evaluating the Proposed Sharing of Each Payment

1. Is the proposal by the PRC SUPPLIER for it to receive a percentage of the payment for each shipment reasonable while the cash advance is outstanding? Why or why not?
2. Do you think the sharing percentage should be 75/25 or some other percentage? Give reasons for your position.
3. What is the trade finance “tool” that should be used to effect the proposed sharing of each payment? Please be prepared to explain precisely how this would work.

Structuring the Delivery Risk The U.S. BUYER is concerned with the risk of non-performance by the PRC SUPPLIER in delivering the mineral and in repaying the cash advance. Hence it has asked for and will receive a Letter of Guarantee from PRC SUPPLIER’s bank, Bank of China, ensuring timely delivery of the product. Questions:

1. How is a letter of guarantee (sometimes called a standby letter of credit, sometimescalled a performance guarantee) different from a commercial letter of credit?
2.  Is it correct to say that the letter of guarantee to be issued by Bank of China will guarantee the timely performance of its customer, PRC SUPPLIER? If yes, please explain. If no, please explain what function the letter of guarantee will serve.
3.  If the PRC SUPPLIER is located in Nanning City, the capital of Guangxi Province (between Guangdong Province and the border with Vietnam), which branch of the Bank of China is likely to issue the letter of guarantee? Is this the same as, better than, or worse than having the letter of guarantee issued by Bank of China-Head Office in Beijing?

Risk Mitigation Even with an Irrevocable Letter of Guarantee issued by the local branch of Bank of China, the U.S. BUYER remains concerned about PRC risk. What risks are these? Since Bank of China will not permit confirmation of its letters of credit by another bank, and similarly, its letters of guarantee, except a confirmation from one of its own branches, subsidiaries or affiliates, how might U.S. BUYER structure the deal to find the comfort of a “confirmation,” without coming into conflict with Bank of China? Give TWO feasible solutions (there are three feasible solutions), using the trade finance “tools” discussed in class. Final Result

1. Now that you have drawn the diagrams and considered the risk and reward for each of the parties, do you think this turned out to be an academic exercise, or do you think that the relevant documents were signed and this was a DEAL?
2. Assuming for sake of argument this was a DEAL, do you think this transaction proceeded smoothly over the 4 year period between the Chinese Seller and the U.S. Buyer, or do you think there were serious problems, such that the guarantor, Bank of China, became involved?

Case: 4 FUJIAN BOND

1. Prospective Issuer: Fujian Investment & Enterprise Corporation (FIEC), the "treasury" arm of Fujian Province (later named Fujian International Trust & Investment Corporation, or FITIC)
2. Main Competitors: First Chicago (US), Nomura Securities (Japan), Deutsche Bank (Germany)
3. Size of Project: US$ 50 million
4. Project Type: International Bond Issue for a Chinese Provincial Corporation
5. Location: Fuzhou, capital of Fujian Province
6. Background:·

There had been a handful of Chinese bond issues in the international markets from 1979, the beginning of the Open Policy, through 1985. The issuers had primarily been national entities such as Bank of China and CITIC (China International Trust & Investment Corporation). The only Chinese Province to be permitted to issue internationally had been Fujian Province, and it had twice issued Yen bonds in Japan. FIEC, on behalf of Fujian Province, had issued a Yen 5 billion, 5- year bond in 1983, with the guarantee of Bank of China. In 1985, FIEC issued a Yen 10 billion, 10- year bond, without any guarantee. Both issues were arranged by Nomura Securities, at that time the largest securities firm in the world (i.e., bigger than Merrill Lynch). In early 1986, FIEC was again interested to go to the international markets. It was evaluating Yen, DM and USD bonds. You are the China Country Head for The First National Bank of Chicago (First Chicago). It is January, 1986. You are reviewing FIEC's previous bond issues and considering what you sh_ould propose to FIEC. · You decide to · off er on a best efforts basis to arrange a (i) US$ 50 million (ii) 10-year bond issue in the (iii) Singapore markets, with (iv) annual interest payments, (v) bond redemption at maturity (non-amortizing principal payments) and (vi) without a Bank of China guarantee. You pick Singapore rather than Hong Kong because you have a joint venture merchant bank in Singapore with a local partner, the Chairman of which is also the head of the Singapore Stock Exchange and because you believe the top dozen likely competitors are stronger than you are in Hong Kong but weaker than you are in Singapore. Task:  Questions 

1. FIEC is one of over 200 "ITICs" (international trust and investment corporations) established in China by Provinces and Municipalities. Generalizing from the Prospectus excerpt on FIEC's business activities, identify 2 main business purposes of a Provincial ITIC.
2. You are discussing one-on-one with the 55-year old, Chairman of FIEC.
3. *Tell him why your proposal should be attractive to him.(Name at least 5 reasons, small and large. Consider: amount; term; currency; fixed rate; no guarantee; "today Singapore, tomorrow ... ?")
4. What are likely to be his principal concerns? (Name at least 2 concerns.)
5. Who had to approve this bond issue from the Chinese side? (Hint: China is the ultimate example of "matrix management".)
6. Assume once again you are First Chicago's China Country Head. Notwithstanding your brilliant proposal, what was the one obvious problem in 1986 with your pione-ering efforts to bring a Chinese issuer to the Singapore markets for the first time?
7. *What reasons would you have given to persuade FIEC against doing a third Yen bond? [Note: This is the KEY question, bow to defeat an incumbent competitor.]
8. What comparative analysis would you have made to show the benefits of a USD bond in Singapore vs . .a. DM bond in Europe?
9. How many financial institutions were invited to bid for the bond mandate?
10. How long did the transaction and approval process take, start to finish?
11. It is November, 1986 and you have won the mandate and successfully arranged the FIEC bond. Congratulations! Now, what is your strategy for marketing this product elsewhere in China? Specifically, *who will you market to next, *who else will you certainly want to talk to, and what locations· will you visit?
12. After the FIEC bond issue in Singapore, what positive commercial events subsequently occurre? for Fujian_ Provin_.ce? For Singapore-? (Hint: Reflect on Question 1, FIEC's- main business purposes.)
13. After the FIEC bond issue in Singapore, what positive political events subsequently occurred?
14. What happened to the principal payment due 10 years later, in 1996?
15. What happened to FITIC and its outstanding overseas loan and bond obligations when Guangdong ITIC was shut down by the central government in October, 1998?
16. What is the current status of FITIC and its outstanding overseas obligations?

Case: 5 CHANGCHUN PEPSI You work for a medium-sized, US$200 million Venture Capital fund in Hong Kong, looking for good early, mezzanine and late stage direct investment opportunities in China. As a financial investor, you like investments where there is a dominant strategic investor which has core competence in the business you are considering investing in. You have received the following materials (attached): 1. Cover letter (1 page); 2. Executive Summary (8 pages + 1 page financial model). 1. Qualitative Questions

1. Strengths/Weaknesses
2. Name at least 3 strong points of this investment opportunity. Name at least 3 weak points.
3. Assume you decide you want to invest. How would you mitigate (reduce) or eliminate these weak points?

B. Concerns Evaluate the following potential concerns and mark each one as either HIGH CONCERN, LOW CONCERN or NO CONCERN.

1. Seller has observer status on the Board of Directors, but no vote.
2. Plant is located in a cold region.
3.  Coke has plants in Shenyang city (300km south) and Harbin city (150km north), although there is no Coke plant in Jilin Province.
4. Competition from imported soft drinks after China joins the World Trade Organization (WTO) [which occurred in Dec 2001].
5. Pepsi’s future growth in China will be limited by the authorities because Pepsi and Coke together have 50-60% market share already.
6. Price deflation in China will continue.
7. Changchun Pepsi does not make its own concentrate (syrup).
8. Can Pepsi-CHINA control rogue (unauthorized) sales by other Pepsi plants (e.g.,Beijing Pepsi) into Changchun Pepsi’s exclusive territory?
9. Seasonality of sales
10. The JV has no debt.
11. The JV has not paid any dividends yet.
12. If the JV builds satellite plants in Harbin city and Jilin City, then

• the JV may use up most of the free cash flow otherwise available for dividends.
• b. there may be a cash call (request for additional equity investment).

13. There may be a further expansion of the plant in 2003.

• C.  Describe the “FX risk” in this investment.
• Explain why FX risk should be a concern.
• Explain why FX risk should not be a concern.

D. Financials (Please refer to Appendix I).

• Does the JV have revenues? Profits?
• What do you consider the key variables in this financial model? Why?

E. Exit Strategy

1. What are the exit possibilities?
2. A single Pepsi plant, minority-owned by Pepsi, has listed in the “A” share market in Shenzhen. Does this event give you comfort that you can exit this investment through an IPO? Why or why not?
3. Are Pepsi and the other shareholders likely to have a right of first refusal over the sale of your shares to a third party? Is that likely to affect your sale price? Explain.
4.  Do you think Pepsi would give you a “put” option, the right (but not the obligation) to sell your shares to Pepsi in (say) 4-5 years at some multiple of P/E (price-to- earnings ratio)? Explain.
5.  Assume your answer in E4 is YES. Then, is Pepsi likely to demand a “call” option from you, which would effectively limit the upside potential of your investment? Explain.

F. Assume you are the Head of the Investment Committee. The internal recommendation to the Committee is to make this investment, citing the following “Top Five Reasons”. What is your opinion of each of these reasons?

1. Access to Booming China Consumer Market (excellent way to benefit from rise in Chinese consumer spending. Investment bet on growth of domestic Chinese economy.)
2. Pepsi Name and Brand Recognition (an immediately recognizable name, with strong appeal to future investors.)
3. Experienced Management (Pepsi is an experienced player in China in this business, which is their core business.)
4. Scarcity Factor (this is the only deal where Pepsi has allowed financial investors to participate (TRUE!). Further, in several of Pepsi’s other plants, Pepsi is not the majority owner.)
5. Limited Downside (given the demonstrated strong demand for Pepsi products and limited competition, the profitability of the venture is virtually assured.)

2. Valuation Question Seller is seeking to sell its 8.2% share in Changchun Pepsi for US$16.0 million. Based upon the information you have, would you recommend that your Investment Committee seriously consider purchasing Seller’s 8.2% stake...

1. ...at a price of US$16 million (assuming that is the lowest negotiable price)?
2. ...at any price? If so, state your price (which you sincerely believe the Seller could accept) and, if below US$16 million, explain to the Seller your justifications for the lower price.

3. Final Question

1. In light of the additional information you have learned from researching the Qualitative Questions, would you now recommend to your Investment Committee to seriously consider this investment? Why or why not?
2. If YES to Answer III A, at what price would you consider investing?

Case: 6 LE MERIDIEN LOMBOK (INDONESIA) You are the Managing Director of a famous investment bank, headquartered in Hong Kong with regional responsibilities. You have called on the Asia Pacific Area Head for Le Meridien Hotel Group ("Le Meridien"), a large and welUmown French hotel operator and part of a larger travel and leisure group owned at this time by Air France. Le Meridien has been quite successful in Thailand with a "town & resort" or ''business & pleasure'' strategy. In Thailand, Le Meridien has a city hotel in downtown Bangkok and a resort hotel on the island of Phuket, one hour away by air. Business travelers who stay at the city hotel earn privileges toward staying at the resort hotel, and vice versa. This strategy has worked very well, notwithstanding fierce competition in the downtown Bangkok market (?.g., a Grand Hyatt, a Regent and an Intercontinental hotel are all within 5 minutes walking distance of Le Meridien-Bangkok). Le Meridien proposes to pursue a similar strategy· in Indonesia. It has just opene<J a. . · splendid city hotel in Jakarta. It has entered into an agreement with a medium•size local partner, the Modem Group (whose core activity is the local distribution of Fuji film, cameras and related products), to buy land and build up to 4 resort hotels on 4 different islands in Indonesia. The first resort hotel will be built on the island of Lombok, adjacent to the island of Bali and one hour by air from Jakarta. The total project cost for· the resort hotel, Le Meridien Lombok, is estimated to be US$ 18 million. Le Meridien has the need to raise a US$ 9 million 9-year term loan (in USD or Rupiah) to finance the purchase of the land and the construction of the resort hotel. So effectively, there will be 50% equity and 50% debt in the capital structure. Le Meridien is also looking to find one or more additional equity investors to invest approx. US$ 3.42 million for a 38% stake in the venture. The final ownership structure of the Joint Venture company, which will own the land and the hote4 is contemplated to be as follows: Le Meridien says it is so confident of the success of the hotel that it has committed, unusually for a hotel management company, to take a US$ 1 million equity stake in the project. Questions ASSUME you are the Asia Pacific Area Head for Le Meridien. You have flown to Paris,France to make a presentation to your Board of Directors, to convince them to approve the Le Meridien Lombok hotel project. 1. Please provide FOUR (4) persuasive arguments why the Board should approve this project. (Hint: One or more of the four reasons should be a "money" argument, for which you will need to answer Question 1 in the Financial Model, attached.) 2. In this case, the Board. of Le Meridien is being asked to invest $1 million, an unusual request for a hotel management company. Please give TWO (2) solid reasons to the Board why this investment is necessary in this case.

• NOW ASSUME you work for the investment bank offering to help the clients, Le Meridien and P.T. Modern, to raise US$9 million in debt and $3.42 million in equity to build the first 5- star hotel on Lombok island, to be managed by Le Meridien. Please answer the following questions.

3. Please prepare answers to each of the Questions on the Financial Model. CASELET: LE MERIDIEN LOMBOK (INDONESIA) As an investment banker, you are looking to sign a Mandate (Engagement) Letter with your clients, offering to provide investment banking services to raise the debt and equity in exchange for "success'' fees, that is, fees payable by the client if you are successful in raising the desired funding. Assume that the typical success fee for raising-debt is 1 to 3% of the amount raised and for raising equity is 2 to 6% of the. amount raised, depending on the perceived degree of difficulty in raising the funds. 4. How much should you ask for as the fee for raising the debt for this project? Please write down at least 3 persuasive reasons why the debt raising in this case will be difficult. Now, IF you were the client, Le Meridien, do you think it will be easy or difficult to raise the debt? Why?

5. How much should you ask for as the fee for raising the? for this project?

Please write down at least 3 persuasive reasons why the equity raising in this case will be difficult. Now, IF you were Le Meridien, the client, do you think it will be easy or difficult to raise the equity? Why?

6. Consider the financial model.

• What are the two principal drivers to revenue? Do you consider the assumptions about these two drivers to be reasonable? Why or why not?
• Consider the assumptions about room revenue and room cost Do you consider these assumptions to be reasonable? Why or why not?
• Consider the terminal value (same as residual value and horizon value). Consider two elements of the terminal value: (1) the multiplier of the base used in the financial model and '(2) the base used in the financial model. Do you consider these assumptions to be reasonable? Why or why not?
• What is the most likely exit for an investor in this project? What evidence would you use to support the likelihood of that exit strategy?
• Based on everything you have considered in the financial model, what do you think a realistic IRR is for this project? (One number only. please, representing your view of the "base case" IRR).

7. For purposes of this question only, assume that the IRR is too low for all prospective financial investors. ·What other TWO groups (categories) of potential investors can you think of that would not be so concerned about the financial return on this investment, because they have some other principal objective? 8. Do you think the debt was raised? If so, which banks (or other lenders) do you think were most likely to be lenders? (Be specific in your answer.) 9. Do you think the equity was raised? H so, which potential investors were most likely to be equity investors? (Be specific in your answer.) 10. Was this 5-star hotel, to be managed by Le Meridien, ever built on Lombok Island? 11. How many 4- and 5-star hotels exist on Lombok today? If any, what is the suggested room rate? LE MERIDIEN LOMBOK Questions on the Financial Model. Please refer to the: 7 pages (4 pages if double-sided) of the Financial Model for Le Meridien Lombok, numbered. FM-I through FM-7.

1. FM-2 and FM-4. In a typical hotel management contract, the shareholders pay the manager a "base management fee" ("Base") based on total Gross Revenue (here called Departmental Income), plus an "incentive management fee" ("Incentive") based on Gross Operating Profit (Gross Revenue less Direct and Indirect. Costs). Here, Gross Operating Profit is calculated as Departmental Income less Administrative & General, Base Management Fee, Marketing, Repair and Maintenance, and Energy. A typical formula for a hotel management contract would be 2? Base and 5% Incentive.

• Please determine Le Meridien's Base as a percentage of Departmental Income.
• Please determine Le Meridien's Incentive as a percentage of Gross. Operating Profit.
• How long is it until Le Meridien is paid back its 'original USD 1MM investment from management fees?
• Assume a standard management contract is 2% Base, 5% Incentive. How long is it until Le. Meridien is paid back its original USD IMM investment from "extra- ordinary" management fees?

2. FM-2. Draw downs. The model assumes the full loan is drawn in one lump sum on. July 1 Year 0. Based on the Information given, is this assumption conservative or not conservative for IRR purposes? 3. FM-3. Consider Occupancy Rates. Do you think the assumptions are realistic? Why or why not? 4. FM-3. Consider Room Revenue and Room Expenses. Assume the ratio of Room Revenue to Room Expense is typically 2:1 (i.e., 50% gross margin). What is the expected ratio is this case? What reasons can you give (at least 2) for, just' g the ratios shown? 5. FM-3, FM-4. On average, what percentage of the total Gross Revenue (here Departmental Income) is going to pay Le Meridien under the management: contract (that is, Base plus Incentive)? 6. General. If the shareholders could collectively decrease their equity by USD 1MM and increase the debt by USD I MM, what effect would this have on IRR? 7. FM-4. Why is there no tax payable in Year 3; the first year of profit, and only 23% (228/987) payable in Year 4, when the tax rate is 35%? 8. FM-5 Consider the IRRs based on different EXIT dates.

• Which of these 4 outcomes seems most-realistic ("base case" scenario) to you? Give reasons.
• What is the logic behind showing an IRR based on exit multiple "before depreciation and tax in respect of next year”? Explain
• Are these the IRRs to Modern? to Le Meridien? to the New Investor? to the JV? Whatever your answer, explain whether you think the IRR to each of the other 3 parties is likely to be higher or lower than this IRR.

9. FM-5, FM-6, F -7,

• Explain the differences among pages FM-5, FM-6 and FM-7,
• Which page do you think is most realistic ("base case"). Why?
• Which case on the page you have selected is most realistic? Why?
• Why do you think the model builder provided 4 EXIT dates for each of 3 EXIT assumptions?

Case: 7 MALAYSIA HYDRO You are the Asia. Area Head for a medium-sized Latin American (Argentine) multinational corporation (MNC) which makes hydroelectric turbines and generators (named "TURBCO"). You are competing against large French, German, Canadian and Japanese suppliers for a US$40 million 5-year contract to build and supply turbines and generators to a Malaysian customer, a State-owned enterprise, the Sarawak Energy Supply Corporation ("SESCO"). You will, be spending three weeks in Kuching, State of Sarawak, non-peninsular Malaysia (see map), to negotiate this deal. [The competitors are: Alstom (France); Siemens (Germany); Hydro-Quebec (Canada); and Tokyo Electric (Japan).] There will be two rounds of bidding, a preliminary round and a final round. There are five (5) bidders in the preliminary round. There are expected to be only two (2) bidders in the final round. The same Japanese supplier won a US$15 million supply contract from. SESCO 3 'years ago. The Malaysian buyer was persuaded to take a "supplier credit" financing, whereby the supplier is the "lender" and provides the financing to the buyer, rather than a third party bank. The Malaysian buyer has asked TURBCO, the Japanese supplier and the 3 other suppliers to prepare and submit (i) equipment bids, together with (ii) financing proposals which include a "supplier credit" structure and price. After further investigation, you have learned the following:

1. The installed Japanese equipment under the first contract has had several operational problems, so you believe the chances are good for you, the challenger, to defeat the Japanese supplier, the incumbent, and your primary competitor.
2. The Malaysian buyer has only made one foreign purchase and thus is only familiar with the "supplier credit" pattern of financing,, and has no knowledge of the "buyer credit" pattern.
3. 3. Under the first contract, the Japanese supplier obtained a low cost (subsidized) export credit (loan) from the Japanese government, but offered market rate (non-subsidized) terms to the Malaysian buyer. The Japanese supplier is, over the life of the loan, keeping the subsidy and not passing it on to the Malaysian buyer. The Japanese equipment is expensive. But because the Japanese supplier is making a spread on the financing, it was able to offer an attractive "all-in" equipment and financing price. Essentially, the Japanese supplier is using the financing subsidy to hide its true equipment price. You believe the Japanese supplier will have access to this subsidized financing when bidding for the second contract, if the financing structure is a "supplier credit."
4. You, TURBCO, have the opposite problem. You believe you can easily compete .on the equipment price against the Japanese supplier. And you think your equipment is as reliable as, if not better than, the Japanese supplier. But your home government (Argentina) does not offer low-cost export credits to help Argentine exporters. Further, if a commercial bank were to lend to you and you on-lend to the buyer, the commercial bank would have Argentine country risk, which is considered "riskier" and therefore the bank would charge more than for Malaysian country risk. You are at a distinct *disadvantage if the customer insists on a supplier credit However, if your commercial bank could lend directly to the Malaysian buyer under a "buyer credit," that would be the least expensive solution for the Malaysian buyer.

• Draw diagrams of your two options: (1) a supplier credit, a loan from a commercial bank to the supplier to the Malaysian buyer; and (2) a buyer credit, a loan from a commercial bank to the Malaysian buyer. -Show the equipment sales contract in each case. (Reference diagrams may be provided for you to check your work)
• The advantages of a buyer credit are described in an attachment to this case. What are the advantages of a supplier credit? Name at least TWO compelling advantages for a buyer.
• Preliminary Round of Bidding

Task: 

1. What is your immediate goal in the preliminary round of bidding?
2. The Malaysian buyer has, requested a financial proposal which includes a supplier credit price. You are faced with the choice of presenting (a) only a buyer credit, (b) only a supplier credit, (c) both, or (d) some variation on these 3 basic choices. You know that a "buyer credit" effectively unbundles the equipment cost and the financing cost, showing two separate prices; in contrast, a "supplier credit" bundles the equipment cost and the financing cost into one "all-in" price. You know that your equipment cost is lower than the Japanese equipment cost You also know the cost of the financing under a buyer credit from anywhere in the world is competitive with the cost of the buyer credit from Japan, because ANY commercial lender would have the same credit risk in each case, that of Malaysia and the Malaysian buyer. Moreover, in a buyer credit, the Japanese subsidized export credit might not be available to your Japanese competitor, because of the time it would take for the Japanese government to assess the credit risk of the Malaysian buyer (that is, if the Japanese government were willing to make a sub_sidized loan to the overseas Malaysian buyer, rather than to its Japanese exporter, it would have to assess the credit risk of that overseas buyer, which likely would take several months). Further, you know that the cost of your supplier credit is NOT competitive, because the bank that lends to you will have Argentine risk, compared to the bank that lends to the Japanese supplier which will have Japanese risk.
3. What should you do for your financial proposal -- (a), (b), (c) or (d) above? How should you make your bid in the Preliminary Round? Explain and defend your decision.

• Final Round of Bidding `

Assume: (1) you, TURBCO, have offered only a buyer credit in your first round proposal; (2) the French, German and Canadian competitors are out (terminated), and only you and the Japanese supplier remain; (3) your final negotiations on the equipment contract have gone well and you feel you have made the winning bid, technically and on price; (4) you will enter the negotiating room in 4 days' time for a final presentation on the financing proposal and, for this meeting, you have been SPECIFICALLY REQUESTED to present a supplier credit proposal with an all-in price.

1. Assume you feel you can Will if you can persuade the Malaysian buyer that a buyer credit is a common financing pattern around the world, and thus it should be requested as one option in the Final Round bid. How might you demonstrate to the Malaysian buyer that buyercredits are a common financing pattern around the world, even if it is a new pattern to this buyer?
2. From which country or countries do you think the most compelling buyer credit examples might come (e.g., U.S., China, etc.)?
3. In this Final Round, you can present (a) a buyer credit only, (b) a supplier credit only, (c) a buyer and a supplier credit, or (d) some variation on these 3 basic choices. What should you do in order to win the business?
4. Assume your best estimate is that the final bids will show the following prices:

[*Buyer Credit is effectively the price for the equipment plus the price of the financing, "unbundled” or separated into two prices.] [**Supplier &edit is one "all-in" price for the equipment and the financing.] What might you consider doing to your bid to improve your chances of winning, whether the Malaysian buyer picks a buyer credit or a supplier credit?

1. E1. Assume you feel that in order to win, you need to attack and try to create doubt about the Japanese supplier. Give TWO compelling arguments, other than price, to the Malaysian buyer AGAINST choosing the Japanese competitor. [Note: Remember, if you make an allegation, you can expect the other side to vigorously deny it, so you have to be able to support your allegation factually.]
2. E2. For this question only, assume you now represent the Japanese supplier. Assume that you feel in order to win, you need to attack and try to create doubt about TURBCO. Give TWO compelling arguments, other than price, to the Malaysian buyer AGAINST choosing TURBCO.

F. Final Outcome. Who won the US$40 million contract, TURBCO or the Japanese competitor? What financing structure did the Malaysian buyer choose, supplier credit or buyer credit? Case: 8 PHILPHOS (The Philippines) (Government Privatization)

1. Name: Philippine Phosphate Fertilizer Corporation (PHILPHOS)
2. Size of Project: Corporate sale of $500 million in assets
3. Project Type: Government privatization
4. Location: Leyte Island, the Philippines
5. Background: The Philippine Government in the 1980's embarked on an industrial plan to make the Philippines self-sufficient in some key industries and products, for example, steel, copper concentrates, and fertilizer. PHILPHOS (Philippine Phosphate Fertilizer Corporation) was set up in the early 1980's on the island of Leyte in central Philippines. Its mission was to produce and distribute fertilizer throughout the Philippine islands, equal to 100% of the country's needs, and to export the surplus production into Asia to earn US$ to repay the cost of building the plant. A world-class plant was built with the latest technology (from Japan and Germany primarily, funded using low-cost export loans denominated in Yen and DM). An excellent source of phosphate rock for the plant was found in the Republic of Nauru (see reference materials). There was nothing that went very wrong with the plant, but 10 years later it was only running a small operating profit and was unable to service the interest and principal on its debt (in part because the US dollar and thus the Philippine peso had depreciated against the Yen and the DM).

It is now January, 1991. Assume PHILPHOS has US$ 500 million in assets and, as best can be determined, US$ 700 million in liabilities. The Philippine Government has been engaged in the privatization of government assets for the past several months. PHILPHOS has been put up for sale, but there were no bidders, because the Govt. wanted to sell all of the assets and all of the liabilities as a package, without being able to identify all of the liabilities or offer at least a "cap" (maximum limit) on liabilities. You, Philippine Country Head for Merrill Lynch, have had several conversations with the Undersecretary (equivalent to a Vice Minister) for Trade and Finance, who is also Chairman of PHILPHOS, about a negotiated sale Q..?., a private sale rather than an open bidding sale). Task:  QUESTIONS As an investment banker, it is desirable to seek an exclusive mandate from the Seller (the Philippine Government) before you spend time to evaluate the assets and liabilities, develop a feasible plan for sale, and find a buyer. The Chairman of PHILPHOS is willing to give you an exclusive mandate for a stated period of time, provided it is without cost to PHILPHOS.

1. If you are not paid by the Seller, is the exclusive mandate worthwhile? Why or why not?
2. For this private sale, how many months would you seek in your exclusive mandate? How would you write, in a manner most favorable to you, the text for extending the mandate at the end of the initial time period?
3. Why is a government seller reluctant to negotiate a mandate with a "success" fee (contingent fee, payable only upon completion) with an investment bank? Is the government Seller being wise, or foolish?
4. If you are not paid by the Seller, then presumably you expect to be paid by the Buyer under some kind of mandate. Is it a conflict of interest to have an exclusive mandate from the Seller and an exclusive mandate from the Buyer? From multiple potential Buyers? Does this happen very often in Asia? In America?
5. In a typical M&A (merger and acquisition) deal, where you are paid by the Seller, the investment bank would charge a "success fee" (contingent upon completion) as a percentage of the sales price, e.g., 1 % of US$500 million or US$5 million. The higher the sales price, the higher the success fee. The interests of the investment bank and the Seller are aligned. In this case, the government Seller will not pay you. Assume you are negotiating with the

BUYER over your fees. How would you structure your fees - "success fee" and a possible "incentive fee" - which incentivizes you to get the best possible deal for your Buyer client? 6. PHILPHOS has assets in addition to the main plant complex. It owns raw land adjacent to the site. It owns a Grade "A" office building in downtown Manila (the desirable Makati business district). It owns warehouses at many distribution points throughout the islands. As an investment banker, what would your approach be to these assets? 7. You identify a buyer for the assets only. After much discussion, they are prepared to pay the Government a one-time payment for the assets AND agree to share any "windfall" (extraordinary) profits, but not any ordinary profits. Why would the Government insist on this kind of sharing, beyond the initial sale price, EVEN IF it means a lower initial sale price? 8. After many months of negotiations, the Undersecretary for Trade and Industry (also, PHILPHOS' Chairman) reaches a detailed 30-page Heads of Agreement with your buyer. The Agreement is approved by the Secretary (equivalent to a Minister) for Trade and Industry. The Agreement now goes before the Cabinet (group of Secretaries) for final approval. It is presented by PHILPHOS' Chairman to the Cabinet. A vote to decide "yes" or "no" is called for.

• What substantive concerns would the Secretary for Agriculture have (name 3)?
• What substantive concerns would the Secretary for Finance have (name 2)?
• Just prior to the YES/NO vote, one crucial question is asked by one of the bureaucrats about the procedure (not the substance) of the imminent decision. What is the question?(Hint: You must transform yourself and ANALYZE the situation like a bureaucrat, in this case a senior, Cabinet-level bureaucrat, interested to avoid any criticism by the public of his decision-making.)

9. What do you think was the final outcome of the PHILPHOS privatization?
10. What lessons are there for doing ANY government privatization worldwide?

Case: 9 PAN ASIA - DELIRIUM You work for a large Hong Kong-based corporate, in the position of General Manager-Investments. You ma a US$500 million in-house Fund and are looking for good early, mezzanine and late stage direct investment opportunities in Asia in the New Economy — high technology software and hardware companies. It is June 30, 2000. The US stockmarkets have been rising in 1998, 1999 and 2000 and reached their all-time highs in March, 2000. They have cooled off a little bit and have declined about 12-15% in the past 4 months. No one knows whether the, market will "bounce" and go back up, level of or continue downward. You have received the following materials:

1. (INTRO", 1 page). Email from a college friend introducing a web business called Delirium,
2. ("PRESENT", 35 pages). A power point presentation (hard copy). This is the principal source of your information. The CEO will make this presentation on July 1, 2000 to you.
3. (PPM, Excerpt, 4 pages). The Private Placement Memorandum, 83 pages in total, is the information booklet prepared by a leading investment bank, DLJ, in support of the Series "A" Convertible Preferred Stock being offered. The Excerpt contains the first page of the Term Sheet for the sale of Stock and 3 pages on management.
4. (DIDM, Excerpt, 7 pages). These are selected pages from the LB.-prepared Due Diligence Materials, the detailed exhibits (mostly financial information) to the PPM.
5. ("INTERNAL" Excerpt, 6 pages). An internal summary of this business "space" (sector, for those of you still in the Old Economy), prepared by an MUST MBA summer intern.

Task:  VALUATION QUESTION Delirium is seeking to raise up to US$30 million through issuance of Convertible Preferred Stock (you may assume an 8% p.a. dividend rate), 'Based on the information you have, would you recommend to your Investment Committee to make an investment in. Delirium of between US$10 million and US$30 million, PROVIDED the pre-money valuation is ....

1. US$105 million (7 times expected 2000 revenues)? (Note: This price is Delirium's initial asking price.)
2. If not, at what price would you consider investing? (Note: Given the size of your in-house Fund, and the time and effort involved in due diligence, it doesn't make sense to invest less than US$10 million.)

(Note: "pre-money valuation" is the-value or net worth attributed to the company before taking into account the latest round of equity contribution.). PAN ASIA - DELIRIUM

1. About The Business

A1. In your own words, describe the business of Delirium. A2 (PRESENT 4, 17 and 19; DDM p.5) As of June, 2000, where is Delirium located? Which offices are contributing most of the revenue? A3 Name at least 3 strengths of the company. A4 Name at least 3 weaknesses of the company. A5. (PRESENT, p,17). "First Mover Advantage". Some might describe Delirium's strategy as, "Build the infrastructure and the clients will come". Does the strategy make sense for (say) the investment banking business? For the web solution business? - A6 (PRESENT, p,18), "Successful Recruiting and Retention Program''. What do you think of this graphic? How might it be misleading? A7 (PRESENT, p.4, 17 and 19) What do you think of the geographic expansion strategy? A8 Does the strategy of leveraging the company's U.S. technological. expertise into Asia seem logical? A9 (PRESENT, p23). Part of Delirium's stated growth 'strategy is to grow by acquisition, and make investments. Why grow by acquisition? Give reason. (at least 3) why Delirium wants an investment arm. A10. (PRESENT, p.26). What is your reaction to this graphic? Do you think it is an effective, way to portray Delirium vs. its competition? A11, (PRESENT, p.10 and p.26) China.com appears as both as client (p.10) and a competitor (p.26). Assume this is true. Can you explain how this can be? A12. (PRESENT, p.9) Consider this graphic. Now reread the INTERNAL summary, Does Delirium's strategy fit well with what INTERNAL suggests is the most profitable part of the e-consulting business? Why or why not?  PAN ASIA - DELIRIUM B. About The People.(PRESENT, p.6) "Experienced, Connected Management Team" B1. a. When did CEO Joe Ngai graduate from Harvard Business School?

1. How many years work experience does Joe have?
2. Was Joe a co-founder of Delirium?
3. What is Joe’s skill set?

B2 Vincent Chou and Royce Hong are co-founders of Delirium;

1. Where is Vincent froth? Royce?
2. What business skill set does each bring to Delirium?
3. In what country is each one's business connection?

B3 When did Bill Moon join Delirium? Skill sit? Main country expertise? B4 Why did the company start operations in New York? Why, probably, was Delirium's second office in Taiwan and its third office in Korea? B5 Overall, do you feel confident this team will manage your investment as carefully and prudently as you would? Why or why not? PAN ASIA DELIRIUM 1. About The Financial Aspects Cl. (PRESENT, p.28 and p.29). What is the YTD revenue base on. April 1, 2000? Expected YTD revenue on December 31, 2000? Look carefully at p.28. How were these revenue forecasts probably calculated? C2. (PRESENT, p.30). What is the expected YTD expense base on December 31, 2000? (p.30), What is the approximate "burn" rate (total expenditure rate). per month for year 2000? Year 2001? Year 2002? C3. (PRESENT, pps. 30-31) For Years 2001 and 2002, what are:

• Expected revenues.
• Gross margin. Why does it seem important to show a Gross Margin >50%?
•  Operating income/(loss).
• Revenue per employee. Do the Utilization Rates and Revenue per Employee for Asia seem reasonable compared with the. U.S.? Why or why not?

C4. (PRESENT, p.32 and DDM, p.3) Give a detailed breakdown of how the US$30 million in Series "A" funds will be used. What uses if the company is only able to raise U$$20 million? (Note: The investment banker's fee is 7% of the total amount raised, then there are "fixed" costs for auditors, lawyers, etc.) C5. (PRESENT, p.32) What does "conversion of a promissory note" mean, and as an investor, how do you feel about this use of Rinds? C6 PPM, p.1) Consider the terms of the Convertible Preferred Stock. (You may assume the dividend rate fixed at 8% p.a.). In evaluating your investment return, should you take into account the potential 8% p.a. dividend payment? My or why not? If not, should you then count it as zero (that is, ignore it), or assume something between 0% and 8%? C7 (DDM, p. 1 and p.6-7) As a general rule of thumb (in 1999 — early 2000 anyway), an I.B. would advise a start-up. it could probably do an IPO based on quarterly revenues of US$9-10MM or annualized prospective revenues of US$36-40MM. On this basis, when does Delirimn plan to go IPO? C8 (PRESENT, p.3 and DMM, p.8) Delirium had about 60 employees in January 2000, has about 120 employees as of June 2000 and plans to grow to 350 by end 2000. Of those, about 270 are 'billable headcount" (i.e,, professionals whose time can be charged to the client). In Year 2001, Delirium plans to add 135 "billable" headcount a 50% increase, What reasons would Delirium likely give you for such a rapid growth plan? Do you agree with Delirium's reasoning? C9 (PRESENT, p.3 and DDM, p.4). As a rough calculation, the way Delirium will achieve its target of US$7.3MM in revenues in 4Q 2000 is: Employ about 65 "billable headcount" in the U.S., at $175/hr and 65% utilization rate. Employ about 180 "billable headcount" in Asia, at an average of $65/hr and an, average of 65% utilization rate. Rule of thumb: 2000 billable hours per year; 500 per quartet. So, 65 people ® $175/hr * 65% utility * 500 hours ----- U.S.$3.7MM 180 people @.$65/h.r.* 65% utility * 500 hours = U.S.$3.5MM total U.S.$7.2MM Does this business model seem logical to you? If the assumptions about billable par employee and utilization are- more conservative then the actual results of Delirium's leading. U.S. competitors, does this increase your comfort level? Why or why not? C10.(DDM, p.6) Assume Delirium decides to go MO in 3Q 2001. Assume all of Delirium's projections come true, and 3Q 2001 revenues are U.S$12.255 million, and revenues for the 4 quarters thereafter are projected to total US$78 million. If the investment banker advises Delirium it can go public at a pre-money valuation of 12 to 15 times prospective revenues, what will the Company be worth? What will your paper profit be on a US$10MM investment made at a pre-money valuation of US$105MM? Case: 10 YADANA GAS PIPELINE (Myanmar (Burma) / Thailand)

1. Name: Yadana GAS Pipeline
2. Size of Project: US$ 1 billion pipeline front the Gulf-of Martaban, Myanmar (Burma) to the Thai border
3. Project Type: Loan to MOGE (Myanmar Oil and Gas Enterprise, the national energy company of Myanmar) to purchase a 15% equity stake in the pipeline, guaranteed by the Ministry of Finance and Revenue)
4. Location: Yangon, Myanmar (Rangoon, Burma)
5. Background: You are a That banker. You hold the position of Head of the International Department of Siam Commercial Bank (SCB), .headquartered in Bangkok, Kingdom of Thailand. SCB IS the third largest commercial bank in Thailand after Bangkok Bank and That Farmers Bank. You are responsible for all loans outside of Thailand in Southeast Asia (your "territory" includes Burma, Cambodia, Laos and Vietnam). You have just received the “Concept Paper"-from AIA Capital ("Proposal'") in respect of proposed $175 million term loan financing (a US$150 in principal borrowing tranche, and a US$25 Million tranche to fund interest costs, and arrangement fees and expenses). Your team has gathered other information as well (see attachments). PTT (the national energy company of Thailand) is a good customer of your bank, and they are keen to have your bank's support on this pipeline project. You must evaluate the Proposal and present your recommendation to the board of Directors of Siam Commercial Bank.

ASSUMPTIONS. For purposes of your analysis, you may assume the following: i The data and diagrams are accurate. ii. The pricing is attractive for a lender for this kind of loan with these terms and security. iii. Five other respected lenders have committed to provide US$30 million each, so with SCIrs commitment, the syndicate (group) of banks will be complete (indeed, slightly oversubscribed since 6 * 3 = 180. This means each lender may end up lending slightly less than US$30 million). AIA Capital's parent company, AIG, is one of these committed lenders, which is evidence that the parent of the investment bank arranging the deal believes in the deal. Bangkok Bank, your bigger competitor, has also committed. SCB has been invited by ALA. Capital to be a co-Arranger, a highly visible position (and worth 50% of the $4 million in arrangement fees), in addition to being a lender. Task:  QUESTIONS

1. Who is the borrower, the party for whom the funds are being raised? What will the loan proceeds be used for?
2. Is there a mandate? Among Which parties? Who will pay the investment bankers if they are successful at raising.-the funds? From what source?
3.  Who or what is (a) Yadana? (b) Total? (c) PTT? (d) SLOR.C? (c). Martaban? (f) Yangon?
4. What is the total project cost?
5. When is it expected that the gas will begin to flow? For how many years?
6. Would you characterize the Concept Paper as neutral, positive, or negative? If you said positive, why does it identify so many risks? If you said negative, why is the investment bank using such a negative document presumably to try to attract potential lenders? -
7. The investment bank has described this deal to you as substantially a "Thai risk" deal rather than a "Myanmar risk" deal.

• What arguments can you make that this is indeed a substantially "Thai risk" transaction? (name at least 3)
• What are the weakest points in calling this a "Thai risk" deal? (name atleast 3)

8. Would you characterize this loan to a prospective lender as: (a) a non-recourse project financing; (b) a limited recourse project financing; (c) an unsecured government loan; (d) a government guaranteed loan; or (e) something else? Please explain.
9. Why has Total set up one company for the production for gas and another company for the transportation of the gas? (Hint: thee pipeline is twice the size needed for the Yadana field)

10. Broadly speaking, how much Gross Revenue is the Yadana project expected to generate once the gas is fully flowing (years 2000 onwards)? What is the aggregate estimated cash flow available to the lenders between 1997-2003 to service (pay back) the US$175 million loan and interest on the loan? So, how do you feel about the security aspects of this loan?
11. As the investment banker, apart from. Thailand, banks in which countries would likely be the most interested?

KEY ISSUES (Remember, the Board of Directors of Siam Commercial Bank is looking for your recommendation)

12. TATE. YOUR MOST COMPELLING REASONS (at least FIVE) FOR SCB's COMMITTING TO DO THIS DEAL.

13. STATE YOUR 1V10ST COMPELLING REASONS (at least FIVE) AGAINST SCB's COMMITTING TO DO THIS DEAL.
14. By April, 1997, when the final Information Memorandum was published, seven (7) financial institutions committed. US$ 30 million each, to this transaction (total, US$ 210 million), subject to a number of conditions, including some minor pricing adjustments and some other conditions which appeared could be resolved between the borrower and the lenders. In other words, on April 1, 1997, you are perhaps 4 weeks away from signing this important deal.

• What event announced in April, 1997 and documented on May 20, 1997 — external to the parties involved in the Yadana project — had a chilling effect on doing business in Myanmar?
• Was the US$175 million Loan Agreement signed anyway?
• Did the Yadana pipeline get built? On tune? On budget?
• Did the Thai pipeline to Ratchaburi (near Bangkok) get built? On time?
• Did the Ratchaburi power plant get expanded to accommodate the Yadana gas? On time?
• Is the gas now flowing from Yadana to Ratchaburi?
• What lessons can be learned from the Yadana Gas Pipeline project

Case: 11 TV INDIA Attached is an 11-page Excerpt from an Information Memorandum describing a new investment opportunity in India, TV India. You are the Head of the Investment Committee for a USD 400 million Venture Capital Fund headquartered in Singapore, looking for good investment opportunities in Southeast Asia and South Asia. Over the weekend, you have read the Information Memorandum for. TV India. Task:  Questions:

• How would you describe the principal business of TV India?
• Where is Mauritius and why does TV India need to have a company (TVM) based there?

(Hint: You may need to research the structure of foreign investments in India.) 3A Why does this investment appeal to you? Give at least 3 compelling reasons, based on the Information Memorandum. 3B Why does this investment not appeal to you? Give at least 3 compelling reasons, based on the Information Memorandum.

• Founding Investors.
• What contribution(s) is The Hindustan Times group likely to make to TV India? B. What contribution(s) is Pearson likely to make to TV India? C. What contribution(s) is Television Broadcasts likely to make to TV India?
• Why are the Founding Investors looking for one or more new investors? (Give at least 3 reasons.)
• If your VC Fund were to make this investment, what are your likely exit (divestment)options?
• Identify the 3 most significant risks in the business of TV India and how you might mitigateor eliminate each one.
• Based on the Information Memorandum and your experience, would you recommend to your Investment Committee to pursue this opportunity further? Why or why not?