N EW Other Online Simulations ! ADMINISTRATION SCREENS from Harvard Business Publishing results team summary scenario setup reservation prices zopa final Blackstone IRR completed deal prices deal price vs. stock options pool deal price vs. pension prefunding due diligence Due Diligence #3289 15 14 14 14 14 14 14 14 14 12 12 14 13 13 13 14 13 Faculty can view a brief video covering administration tools. 9 8 3 0 0 Sales Growth COGS Percent Acetate Flake Southern Methanol HQ Consolidation Item CAPEX Frankfurt Airport Asbestos Liability OXO Antitrust Hired by Blackstone Hired by Celanese Total Sales Growth 14 14 28 COGS Percent 14 14 24 Acetate Flake 14 14 28 9 14 23 0 12 14 28 Southern Methanol HQ Consolidation 12 CAPEX 14 Frankfurt Airport 13 Asbestos Liability 13 OXO Antitrust 14 Finance Simulation Blackstone/Celanese 13 class summary Uses the dramatic setting of a Mount Everest expedition to teach group dynamics and leadership. Students play one of five roles on a team of hikers attempting to summit Everest, and teammates must share information to maximize group achievement. This team-based simulation is ideal for Organizational Behavior, Group Dynamics, and Leadership courses. scenario setup 27 13 Team 4 $76 Bid History Celanese Blackstone Reservation Price: 31.00 Celanese Reservation Price: 45.20 • The Blackstone Group agreed to acquire Celanese for €36.00 per share A comprehensive Teaching Note covers the debrief learning objectives, including: • Celanese has accepted Blackstone’s offer of €36.00 per share . • Blackstone made an offer to Celanese . • Celanese rejected Blackstone’s offer of €35.00 per share . omparison of valuation C methods, such as Capital Cash Flows, Equity Cash Flows, and LBO models • Blackstone made an offer to Celanese . n onflicts of interest among C stakeholders n n n How PE firms generate value in an LBO valuation of return E expectations nique challenges and U considerations in cross-border transactions Negotiation skills Blackstone Reservation Price: $31.0 Initial Offer: $29.12 • Blackstone made an offer to Celanese . Offer Price Stock options Blackstone $0 16:01:00 3:28:24 PM 15:27:22 €29.12 per share 8.00% © 2008 Harvard Business Publishing. All rights reserved. Operations Management Simulation: Benihana Based on the bestselling HBS case on the Benihana restaurant chain, this simulation covers fundamental concepts in service and operations management. Challenges include improving throughput with a batching strategy, how optimal bar and restaurant layouts maximize customer throughput, and how demand variability can be reduced. Students must finally develop the most profitable overall strategy for the restaurant. 4:03:23 PM We believe this offer is insignificant. It may be higher than the of our company. We do not believe that it is our shareholders bes €35.00 per share Offer Price 10.00% Stock options Supplemental Pension Contribution 2.0 • Celanese rejected Blackstone’s offer of €29.12 per share . #2650 Deal: $36 4:13:42 PM 16:11:39 • Celanese rejected Blackstone’s offer of €35.00 per share . log out n Celanese Reservation Price: $45.2 €35.00 per share Offer Price 11.00% Stock options Supplemental Pension Contribution 400.0 • Blackstone made an offer to Celanese . Importance of due diligence in M&A transactions 4:26:26 PM 16:26:05 €36.00 per share Offer Price 11.00% Stock options Supplemental Pension Contribution 400.0 Teaches the principles of pricing in a dynamic and realistic management environment. Students play the role of a regional marketing manager responsible for pricing a fleet of rental cars across cities in Florida. Can be used in class or as homework. Ideal for undergraduate and MBA courses in Marketing, Strategy, Microeconomics, and Operations Management. Leadership and Team Simulation: Everest 26 21 8 team results Pricing Simulation: Universal Rental Car #2093 game details Select a Team n weather conditions analyze health status decide supplies remaining goals on track hiking #2653 Email us if you have problems with the simulation. The process of sampling and adopting any of our online simulations is simple: chat round information Analyze speed Dashboard Overview Weather Health SUMMIT 0 50° O° -50° Supplies Normal 2 3 Goals Leader Photographer CAMP Food: 9 Water: 9 Hiking Speed Physician Marathoner Western Cym Goals Achieved 1 CAMP Information Environmentalist Khumbu Khumbu Icefall Icefall 266.7 feet per hour log out Information 3 3. S tudents access the simulation using the link you provide to them. Each student can pay for individual use online via credit card, or your institution can pay for all students in a single payment. 5 6 © 2008 Harvard Business School Publishing Corporation. All rights reserved. Developed in partnership with Forio Business Simulations. For help, contact Harvard Business School Publishing Customer Support. Valuation Due Diligence Co-authored by Clayton Christensen, this simulation illustrates innovation and risk challenges that face product development managers. Students must balance financial goals with the need to innovate, capitalize on new opportunities, and guard against disruptive technologies. Students must also evaluate issues and opportunities in the context of nebulous market information and constraining financial performance criteria. Deal Structuring #2656 Supply Chain Management Simulation: Root Beer Game Illustrates how oscillations arise in a simple supply chain and how variability increases as one moves up the chain (the “bullwhip effect”). This team-based simulation illustrates the main factors that contribute to the bullwhip effect. In the post-play discussion, students learn techniques to control the bullwhip effect and the elements of effective forecasting. #3101 Global Supply Chain Management Simulation In this online simulation, students make key supply chain management decisions. For the rollout of two models of mobile phones, students take control of managing product design, procurement, and production for four simulated years. #6107 Educators registered on our web site receive free educator copies and Teaching Notes. Apply now: www.hbsp.harvard.edu Phone: 1-800-545-7685 (617-783-7600 outside the U.S. and Canada) Fax: 617-783-7666 Email: [email protected] Web: www.hbsp.harvard.edu Mergers and Acquisitions BASE CAMP Strategic Innovation Simulation: Back Bay Battery Customer service is available 8 am to 8 pm EST, Monday through Friday for courses in: Private Equity 4 1. C all customer service at 1-800-545-7685 (1-617-783-7600 outside the U.S. and Canada) and request educator sample access. 2. If you adopt the simulation, you will be given a specific link to give your students. Blackstone/Celanese 1 4 CAMP -15°F 2 6 n prepare dashboard overview CAMP 9 Finance Simulation Leadership and Team Simulation: Everest MC1151551208 team results The simulation is ideal as a capstone experience for a first-year MBA finance course. Students play the role of the management team at one of three wine producers. They must determine reservation prices and value targets and negotiate over deal terms before they decide to accept (or reject) final offers. Product #M13045 class summary Results are available immediately for post-play review and debrief. Printed on recycled paper. Finance Simulation: M&A in Wine Country Finance Simulation Blackstone/Celanese by Nabil N. El-Hage and Timothy A. Luehrman Exclusive Video STUDENT SCREENS Faculty have access to a debrief video featuring Anjan Mukherjee, a Managing Director at Blackstone who played an integral part in the Celanese deal, as he explains the deal details to a group of students who have just completed the simulation. In this online simulation, students play one of two roles in the landmark acquisition of Celanese AG by The Blackstone Group. Both parties must conduct due diligence, establish deal terms, respond to bids and counter-bids, and consider the interests of other stakeholders. Students negotiate three deal terms: share price, management stock option pool, and supplemental cash contribution to the pension plan. There are three possible rounds of play: Round 1: Determine reservation price. Round 2: Conduct due diligence, determine/evaluate offer terms, and negotiate. Round 3: Conduct additional due diligence, receive and respond to stakeholder concerns, and finalize negotiations. operating assumptions Students prepare once with a how-to video, foreground reading PDF, and role-specific information. Each round of play requires students to analyze information and data and negotiate a possible deal. purchase price inputs Finance Simulation Blackstone/Celanese prepare operating assumptions analyze income statement Overview balance sheet cash flow due diligence purchase price inputs sources & uses of funds exit value & IRR 2004 2004 2005 2006 2007 Confidential Info 2008 Students can see visual representations of EBITDA and cash flows. EBITDA 700 -8.60% 0.00% 0.50% 1.60% 5.20% 1.30% COGS as a % of Sales 62.20% 64.00% 65.00% 67.00% 69.00% 69.00% Gross Margin 37.80% 36.00% 35.00% 33.00% 31.00% 31.00% SG&A as a % of Sales 27.20% 25.30% 25.30% 25.30% 25.30% 25.30% Financial information differs based on which role the student plays. -12.0 8.0 -24.0 -24.0 -42.0 SG&A as a % of Sales After Reduction 27.20% 24.99% 25.50% 24.70% 24.73% 24.32% EBITDA Margin 10.60% 11.01% 9.50% 8.30% 6.27% 6.68% 4.24% 4.75% 3.24% 2.49% 0.53% 1.00% 208.0 231.0 230.0 234.0 232.0 233.0 Blackstone’s offer to Celanese Management Stock Option Pool Blackstone Monitoring Fee 5.0 5.0 5.0 5.0 5.0 Additional Special Charges 15.0 17.2 14.3 14.7 16.2 FD Shares Outstanding 0 2004 2008 due diligence TEV + Transaction Costs Preexisting Unfunded Pension Liability cash flow due diligence © 2008 Harvard Business Publishing. All rights reserved. Students play one of two roles: The Blackstone Group or the chemical company that Blackstone is attempting to acquire, Celanese AG. The objective of the Blackstone player is to get a deal done, within the parameters established by Blackstone’s Investment Committee. The objective of the Celanese player is to maximize shareholder value for the company. Finance Simulation: Blackstone/Celanese Seat time: 2 hours to several days (flexible) Product #3712 Estimation of Changes in COGS COGS as a percentage of sales varied as a result of higher raw material and energy costs and could be partly offset by increased selling price. Over time. COGS as a percent of sales could be Read More >> Both roles can conduct extensive due diligence to inform the valuation of Celanese. Existing Debt + Pension Liability purchase price inputs sources & uses of funds exit value & IRR chemical comparables log out Confidential Info 2003 03-CapEx Multiple of EBITDA Multiple of EBITDA - CapEX 32.66 16.00% 200.0 28.66 13.96% 52.1 -1.0x 1.0x 1,701.8 4.1x 8.2x 525.0 1.3x 2.5x 5.3x 10.7x 5.6x 11.2x 7.7x 15.4x 2,226.8 112.0 2,338.8 878.0 3,216,8 1,403.0 2004 2005 2006 2007 2008 Original 0.0% 05% 1.6% 5.2% 1.3% Consultant 0.5% 4.3% 9.0% 2.0% 0.7% Celanese 0.7% 3.5% 0.7% 0.2% 0.0% 61.0% 61.0% 61.0% 61.0% 61.0% Original Ask Ask Celanese Consultant Consultant You have not yet requested this information from the consultant. Celanese Acetate Flake Restructuring In 2003, Celanese was primarily a manufacturer of commodity chemicals; therefore, it did not incur as many marketing and administrative expenses as a specialty chemicals firm did. SG&A Read More >> Southern Methanol Restructuring Opportunity In 2003, Celanese was primarily a manufacturer of commodity chemicals; therefore, it did not incur as many marketing and administrative expenses as a specialty chemicals firm did. SG&A Read More >> Original € 4.00 million € 3.00 million You have not yet requested this information from Celanese. 0.0 20.0 -12.0 -12.0 -30.0 Consultant You have not yet requested this information from the consultant. Celanese Original © 2008 Harvard Business Publishing. All rights reserved. Chat POTENTIAL SOURCES OF SG&A REDUCTION log out Chat Current decide Sales Growth Projections & the Chemical Cycle Understanding where Celanese is in the current chemical cycle is fundamental to appropriately projecting revenue growth rates. Thecommodity chemical business is cyclical in nature. Read More >> log out TEV + Pension Liability + Transaction Costs Finance Simulation Blackstone/Celanese balance sheet chemical comparables 0.0 Transaction Costs income statement exit value & IRR 208.3 Purchase Total Enterprise Value (TEV) operating assumptions sources & uses of funds EBITDA - CAPEX + SARs Cost analyze purchase price inputs 416.3 + 2003E Existing Debt 400 2008 due diligence EBITDA Equity Value CAPITAL CASH FLOWS 0 2004 decide PURCHASE VALUATION Acquisition Premium being Offered prepare CapEx cash flow Current Celanese Trading Price Per Share Sales Growth EBIT Margin balance sheet Supplemental upfront cash contribution to pension Potential Additional SG&A Reductions Students have access to multiple valuation methods in the simulation, including an LBO model, Capital Cash Flows, and Equity Cash Flows. analyze Copy to Clipboard OPERATING ASSUMPTIONS Students may copy data to the computer’s clipboard and then paste it into the spreadsheet program of their choice. income statement operating assumptions Chat 1998 to 2002 prepare chemical comparables Historical Data Copy to Clipboard Finance Simulation Blackstone/Celanese Each role receives confidential instructions in each round of play. decide Confidential Info Consultant response Extensive analysis of projected industry capacity utilization rates and end-use demand suggests the following sales growth pattern. Chat functionality enables students to negotiate online. The computer plays the role of “consultant” to both the Blackstone deal team and the Celanese management team, as well as the role of three additional stakeholders: the Blackstone Investment Committee, the Celanese boards, and the lender. € 1.00 million You have not yet requested this information from Celanese. -2.0 -2.0 -2.0 -2.0 -2.0 Consultant You have not yet requested this information from the consultant. € 2.00 million Currency for this simulation is the euro. © 2008 Harvard Business Publishing. All rights reserved. Developed in partnership with Forio Business Simulations.
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