Martin Smith Case
Please review the attached case study and the three Powerpoint presentations. As you read over the materials, please consider how Martin should structure his
presentation at the partners’ meeting. Among the issues you may wish to consider are:
? Which company should he recommend?
? Which uncertainties should he highlight?
? Are there valuation issues that he should point out?
? What organisational issues are likely to influence the partners’ decision?
Please choose one deal on Martin’s behalf.
TASK B – Written Paper (70 marks)
Using data gathered during presentation preparation, please submit an individual report elaborating on your presentation (or presenting another deal if you did not
agree with your group). Your report should include a detailed analysis of pros and cons of the proposed transaction, taking into account both individual transaction
merits and Newport’s situation – analysing also risks and merits of the transaction for you, Martin Smith.
In your analysis you need to present what type of a PE deal “your” transaction is.
This report should also contain about 500 words (included in the total count of 2,000) describing your key learning points acquired while working on this assignment.
These learning points may also apply to your experience in working as a group, but should not be limited to it.
You should use online and library resources. If relevant, please support your argumentation with examples from real life. You should carefully document your use of
sources of information, applying Harvard referencing system.
Your report should not exceed 2,000 words (attachments and footnotes are not included)
Martm Smlth: May 2002
Martin Smith gazed out the window of his Westport, Connecticut office overlooking the sun- g’
sparkling waters of Long Island Sound and sighed. Had things gone according to plan, he mused, he
would be scuba-diving in the brilliant blue Caribbean waters. Instead, he was working, or rather
delaying work by contemplating the temperature difference between the waters outside his window ‘32:? g
and those of the Virgin Islands. Apparently, he was not the only one laboring on this Sunday E g2
morning: the “bing” of the elevator sounded faintly in the background.
After weighing three different job offers from leveraged buyout firms as a second-year student at
the Harvard Business School, Smith had decided to accept a position at Newport Partners. Unlike
some of his less fortunate colleagues, he had had a number of offers from which to choose, as his ggfi
background had made him attractive to many buyout organizations. With a degree in economics
from the University of Pennsylvania’s Wharton School, he had joined the investment bank Goldman,
Sachs as an analyst in its corporate finance group. After two years, he had grown tired of the endless
parade of spreadsheets and joined a startup that helped mid-sized firms manage their financial E
planning and strategy. Before this firm failed during the 2000-2001 Internet collapse, Smith had g: E
worked closely with a number of chief financial officers in mid-sized firms, as well as investment 53%
bankers and partners in private equity groups. The firm’s demise had given Smith the chance to leave 2
the business world to attend Harvard Business School and round out his skill set. E
In assessing job offers, Smith had ultimately put a great deal of weight on the certification-or
stamp of approval”-that working at an “old-line” group such as Newport would provide.
Newport Partners was a top tier buyout firm: within the private equity community, it had a strong
brand name” and had historically sponsored very successful partnerships. The group, originally the Elf é
investment arm of a wealthy New England family, had built up a franchise in restructurings and 3
recapitalizations beginning in the 195os. By 2002, the group consisted of 11 seasoned partners with a
range of backgrounds that encompassed financial, consulting, and operation experience. Smith had
not anticipated the tremendous workload facing the organization. Although its seventh fund had
fallen short of its $2 billion goal, closing on $1.2 billion in February 2001, it still ranked among the top
ten highest-closing funds in that difficult year. Recent trends had seen the volume of LBO deals fall
dramatically, along with the amount of money invested-one top tier fund had invested in only one
deal in the previous 20 months. Confronted by fewer opportunities and facing the loss of 17
investment professionals after Newport abandoned initiatives in technology and in Europe, the
remaining staff was evaluating more potential investments than ever.
Senior Research Associate Ann K. Leamon and Professors G. Felda Hardymon and Josh Lerner prepared this case solely as the basis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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