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Q1.)

A strong believer in the benefits of fully liberalized energy markets and industry consolidation, Wulf H. Bernotat had become CEOof E.ON, Europe's second-largest electricity company with the goal of making E.ON a global energy giant. He saw a golden opportunity in 2005 when Endesa, the leading Spanish electricity firm with substantial holdings in Latin America, was put into play following a takeover bid from Gas Natural, its much smaller, Barcelona-based rival. Endesa's board had rejected the bid outright as too low and had vowed to defend the company's independence. But by the end of the year, it had become clear that Endesa would need a partner to fight off the challenge. Bernotat sensed his chance - E.ON had sufficient financial resources and was poised and ready to execute a competing bid.And while Manuel Pizarro, Endesa's outspoken president, continued to tell shareholders and stakeholders alike that Endesa should remain independent, Bernotat knew the Spanish utility much preferred a deal with E.ON than to be acquired by its smaller local rival. He seized the chance and on February 21, 2006, E.ON offered 27.50 per share of Endesa, 6.20 more than Gas Natural's September 5, 2005, bid.

It did not take long for the battle to turn ugly. From day one, Bernotat had faced numerous obstacles, including the Spanish government's overt hostility to E.ON, a German company, taking over Endesa, a powerful Spanish multinational. The Spanish government was prepared to make sudden and seemingly arbitrary changes of Spanish law to subject foreign bidders to extra scrutiny, including a series of seemingly improvised merger conditions. The maneuverings by the Spanish authorities prompted a confrontation between the Spanish government and the European Commission and had led to a public sparring match between Spanish Prime Minister, Jos Luis Rodrguez Zapatero and German Chancellor Angela Merkel.

In spite of the conflicts, Bernatat was quite certain that E.ON would prevail, but then Acciona, a family-owned Spanish construction multinational with close ties to the government, announced that it had purchased significant shares of Endesa in the open market, becoming Endesa's largest shareholder.

As he huddled with his strategy team in Dsseldorf in early February 2007, Bernotat pondered his next move. Should he raise E.ON's bid further to undercut Acciona? How much would he have to pay to secure control? Could he fight Acciona's entry in the courts? Or had the time come to place a call to Chancellor Merkel in Berlin and openly ask for political support? Gazing out at the steadily flowing Rhine River from his ninth-floor office, Bernotat was determined to make the acquisition happen and a new chapter in E.ON's history.

Q2.)"What we want is the book that every vice president threw in the trash because he would be embarrassed to show it to a partner."

In 2008, this was the investment strategy of Adam Blumenthal, founding partner of Blue Wolf Capital Management in New York. "What we're looking for is something that has a solid business at its core, but that has enough other extraneous problems that most people at a private equity fund decide it's not worth doing," he said. In particular, Blumenthal was looking to invest in companies that were in financial and operational distress and had difficult relationships with labor and government.

In early 2008, as the economy was entering a recession, a colleague at another firm asked Blumenthal to consider investing in a paper mill in Nova Scotia. The mill, Pictou Pulp, manufactured northern bleached softwood kraft, a strong fiber that was used to create high-quality paper products. The mill had been run as a cost center for various public companies, and it had not made money in 40 years. In 2008 it was owned by Neenah Paper, a small spin-off of non-core assets from Kimberly-Clark. Neenah was looking to divest itself of all pulp and timber operations, and it had put the mill up for sale.

Due diligence suggested that the mill had a good core business. The mill also presented some significant problems: financial, environmental, political, labor, and operational.

With the bursting of the housing bubble, the lumber industry had gone into a severe recession. Dozens of mills across Canada had been forced to lay off workers, and some mill towns were facing unemployment rates as high as 70 percent. The Nova Scotia mill had been on the market for a year, but few buyers were interested, and it was slated for closure. But as Blumenthal considered the investment, he asked himself, "Is there a reason for this mill to exist if you fix all of these problems? And the answer to that is yes." The remaining question, then, was how much to pay.

Q3.)

The September 2013 electoral victory of a center-right coalition after eight years of Socialist rule promised to bring changes to Norway, including to the country's vaunted sovereign wealth fund. Erna Solberg, the leader of Norway's Conservative Party and the country's new prime minister, had promised to review the fund's structure and policies. During the election campaign, she noted that the investments "might be too big to be handled by just one fund." She added, "You could split it either on getting different handlers to compete better, or have different objectives for your investments in different funds. We're going to explore it, develop and see if it's a good idea."

Norway's sovereign wealth fund (Norwegian Pension Fund Global [NPFG]) was the largest such fund in the world.*At the end of 2013, it was worth 5.4 trillion Norwegian kroner, $US 864 billion, roughly $172,000 for each of Norway's 5 million citizens.

The NPFG's existence and growth came from Norway's long-term view of its petroleum revenues. The country's political leadership founded the fund in 1996. Each year since then, the government set aside the profits derived from Norway's North Sea oil fields, with the plan to withdraw only expected earnings, leaving the capital intact to benefit future generations. To accomplish this goal, the governments had instituted a spending rule to take only 4% of the NPFG's assets each year to help fund the country's current operations.

In terms of governance, the Norwegian parliament, the Storting, set the fund's investment policy, while the NBIM (Norges Bank Investment Management), an arm of the country's national bank, ran the day-to-day operations. The political establishment had insisted that the fund be run in a highly transparent manner. In general observers noted that the NPFG operated under far more stringent investment guidelines and reporting requirements than any other country's sovereign wealth fund.

The NPFG was unusual among its peers in that it invested primarily in publicly traded securities and took broad positions in securities markets. At the end of 2013, the NPEG held 60% equities, 5% real estate and 35% fixed income securities. By mandate, all of the fund's investments were outside Norway. The policy intended to protect Norway's currency against large swings in foreign exchange earnings generated by the petroleum industry. The restriction to foreign investments also minimized the potential of using the NPGF's investments for domestic political purposes.

The Ministry of Finance also insisted that the NPFG be operated under strong guidelines for responsible investing. The NPFG was required to exercise its ownership rights and play an active role in the companies in which it invested. In addition, the Ministry of Finance had excluded a list of around 50 companies from the NPFG's investment portfolio for ethical reasons.

In early 2014 the government began to consider new options for the NPFG. The 2008 losses in the Fund's investments and slow recovery had raised concerns in the country. The new government's call for greater infrastructure investments, a stronger social welfare network, and lower taxes led some observers to question whether the government would call for larger withdrawals from the fund. New political priorities heightened awareness about the fund's role and raised questions about the Fund's strategy, management, and ethical investment guidelines. In particular, Norwegians wondered:

• What was the appropriate investment strategy for the Fund? Should the fund focus on passive, indexed investments? Should it change its allocation of funds to a wider set of assets, or keep its investment focus on stocks and bonds, with a small proportion of other investments? Should it take a more active stance in the companies in which it invests?
• How should the fund execute this strategy? Should it develop investing expertise in-house or should it outsource it? Does it have (or could it hire) the kinds of employees that it needs?
• What role should ethical investment considerations play? Were investment decisions made on criteria other than expected returns limiting the fund's ability to earn appropriately, either through choice of investment vehicles or expenditures required to participate in shareholder issues? What should the NPFG's stance be on investing in companies developing coal, oil, gas and other petroleum products?
• Has setting the oil wealth aside, rather than bringing it into the economy, allowed Norway to avoid the "Dutch disease" of ruining the country's economy with wealth, or has the great wealth still reduced the incentive for Norway to experience the initiative, enthusiasm, and competitive spirit to move ahead?