Intro : this assignment is equal to 20% of your final grade. The role play will have
Question:
Intro: this assignment is equal to 20% of your final grade. The role play will have your team be first year interns at a large NY investment bank. We will have a client (potential) come into the firm and ask for a significant line-of-credit. You will have to prepare a deck to present to me (your boss) to inform me as a team whether you will recommend whether our firm should provide funding to this firm. This exercise will challenge you to work as a group and demonstrate you can
Background: Your team is a group of analysts at a large NY based investment bank. The team has been asked for a quick turnaround for an assessment of a firm in a downtrodden industry at suggested in the following linkhttps://www.nasdaq.com/articles/7-battered-industries-investors-should-avoid-in-2023 (for STP's students this conveniently coincides with the last week of class). Our Bank has been approached by a firm that is in some trouble (financially or other) that wants to establish a $1 billion line of credit (make sure the size of the loan is commensurate with the size of the firm). THE firm is seeking this money from anything from expansion to survival.Your assignment is to design a framework for evaluating this request, as your senior managers at the Bank DO NOT like to lend money to any firm without a thoughtful review of that firm. They believe they are paying you for you to share your professional insights about the firm and at the end of the day, management will take your recommendation to either establish the line of credit, or refuse the opportunity. Mistakes may cost your team their jobs at the Bank, and at the least, set you behind your peers in career development.
You should baseline your approach on themes discussed in your Corporate Finance, but again, you need to tie anything into the scenario that a troubled firm is looking for financing. Your assignment will be to present your findings in PowerPoint format to the class in no more than a 20 minute timeframe and be ready to answer questions from the audience. (I will at minimum expect an all in 25-30 minute presentation which will be scheduled the last week of class)There will be 4 teams of about 6 analysts and I will create each group. Everyone must present and the group should have contingencies in place in case someone cannot present. This will be a group grade, so everyone will share the success or failure of the rest of the team.
Problems do not come in exact form! However, solutions should follow a thoughtful framework to present ideas and potential solutions). Since the exact scope of the class does not tie directly to the exact project the Bank is looking for a thorough assessment that may include:
- Review of the market and economics around this firm. (You can think about all the factors of supply and demand that we have studied and apply this to the firm). I want to know whether the issue with the firm selected is firm specific or something that applies to all the market players.
- Review of Financials - level, trend, and peer (you can also set the stage for a brief review of the major competitors; scale of operations of product and location)
- Assessment of the country(s) risk the firm is doing business in.
- The Bank wants thorough "what/if" scenario analysis. Please include some thought about prospects in the realm of probabilities (a key part of your training has been that nothing is 100% sure in business)
- Review latest firm Strategic Plan (keeping in mind market focus and supply/demand etc)
- SWOT Analysis - this strength, weakness, opportunities, and threats should be done on a global scale
- Review of Corporate Governance. I want to have you review the Board of Directors qualifications and any issues relating to legal or regulatory concerns. - I am adding this because it all starts from the top down.
- Describe the major lines of businesses that your firm engages. Are there noted leaders and laggards?
- Marketing Strategy - how does the firm differentiate itself or its lines of businesses to generate market power? Do they have market power?Here would like thorough review of product diversity and elasticity.
- I especially want a very thorough review of the firm's corporate governance and litigation as these are very impactful for today's business. Don't cheat me or yourself on this!
- Focus on up to date issues -
- Lastly I want you come to a solid recommendation!
*** There is no set agenda for this project except I want to know whether the BANK should feel comfortable with loaning a sizable amount of money to this firm based upon your overall review. Remember in real-life, I am paying you to inform me and provide me some insights that I do not know. I am challenging you to knock my socks off.
Extra thoughts
- Your presentation slides should not have a lot of written word. I like bullets and also the less written, the more you have to say. Don't make things too busy and use the idea that slides are built for 50 year old eyes.
- I don't want or like slide reading. I can read! I want your insight. As we will be limited to no more than 30 minutes per group, you may want to use the approach to point of important takeaways per slide rather that a line-by-line review of all points.
- I am thinking here that I need your independent probability analysis of possible outcomes.
- As we are going through class I do expect you to begin to pick off low hanging fruit as the semester progresses.
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine