Private Equity in Action

Case Studies from Developed and Emerging Markets

Claudia Zeisberger, Michael Prahl, Bowen White

• Publisher: Wiley
• Year: 2017
• Print ISBN: 9781119328025
• eBook ISBN: 9781119327998
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

Global Best Practice in Private Equity Investing

Private Equity in Action takes you ona tour of the private equity investment world through a series of case studies written by INSEAD faculty and taught at the world's leading business schools. The book is an ideal complement to Mastering Private Equity and allows readers to apply core concepts to investment targets and portfolio companies in real-life settings. The 19 cases illustrate the managerial challenges and risk-reward dynamics common to private equity investment.

The case studies in this book cover the full spectrum of private equity strategies, including:

• Carve-outs in the US semiconductor industry (LBO)
• Venture investing in the Indian wine industry (VC)
• Investing in SMEs in the Middle East
• Turnaround situations in both emerging and developed markets

Written with leading private equity firms and their advisors and rigorously tested in INSEAD's MBA, EMBA and executive education programmes, each case makes for acompelling read. As one of the world's leading graduate business schools, INSEAD offers a global educational experience. The cases in this volume leverage its international reach, network and connections, particularly in emerging markets. Private Equity in Action is the companion to Mastering Private Equity: Transformation via Venture Capital, Minority Investments & Buyouts, a reference for students, investors, finance professionals and business owners looking to engage with private equity firms. From deal sourcing to exit, LBOs to responsible investing, operational value creation to risk management, Mastering Private Equity systematically covers all facets of the private equity life cycle.

SECTION V
Turnarounds and Distressed Investing

Turnaround or growth, it’s getting your people focused on the goal that is still the job of leadership.

—Anne M. Mulcahy, Former Chair and CEO of Xerox

CASE 14
CRISIS AT THE MILL: WEAVING AN INDIAN TURNAROUND*

SYNOPSIS

Emerging markets are challenging and require special expertise; India in particular is known to be a tricky business environment for even the most experienced managers, even in good times. The case follows two senior executives, Sankar and Nikhil from Alvarez & Marsal’s (A&M) India practice, as they deal with an urgent request from one of their US private equity clients, Sapphire Capital.

The situation is critical, with allegations from a past employee claiming irregular activities by senior management at the root of the company’s financial difficulties. The company in question is a leading woollen textile manufacturer and exporter with operations in north India. The A&M team needs to act quickly, yet must tread carefully and investigate discretely in the event that the accusations prove to be unfounded.

PEDAGOGICAL OBJECTIVE OF THE CASE

During good times (almost) anyone can lead; it is the tricky times that separate the wheat from the chaff. This case provides the opportunity for managers and professionals to try their hands at a demanding turnaround situation, with financial distress exacerbated by allegations of fraud. Add the setting in India to the mix and one might describe the situation as a perfect storm.

The case provides a challenging setting for readers to improve their understanding of cash flow management and the various business drivers, but with a focus on the short-term needs of the business. An additional complexity comes from the emerging markets setting and malpractice accusations.

SUGGESTED ASSIGNMENT QUESTIONS

Put yourself in the shoes of Sankar and Nikhil, the senior executives at A&M’s India office and develop a plan of action for the interim managers in the role of finance and operations.

1. Where do you see the opportunities to improve the performance of the firm?
2. How would you handle the sensitivities around the accusations of malpractice by (former) senior management?
3. Finally, what would be the key ingredients to make this a successful turnaround?

Using the cash flow templates included in the case, please address the following questions:

4. Does the company have sufficient cash to operate? Determine this by modeling the cash flow from November 2010 to March 2011.
5. What could be done in advance (in November 2010) to improve the situation? Analyze the situation and offer suggestions. Students should grapple with the situation and offer options rather than targeting a perfect answer.

ADDITIONAL RESOURCES

To make the most of this case study, we suggest the following additional sources to provide context and information:

• In particular, we recommend the following chapters from Mastering Private Equity—Transformation via Venture Capital, Minority Investments & Buyout...

Table of contents

• Cover
• Title Page2
• Copyright2
• Preface
• Section I: GP–LP: Relationships
• Section II: Venture Capital
• Section III: Growth Equity
• Section IV: Leveraged Buyouts (LBOs)
• Section V: Turnarounds and Distressed Investing
• Section VI: Private Equity in Emerging Markets
• AAcknowledgements
• About the Authors
• EULA