Abstract

This case is intended to take students through the cycle of a direct investment, during which a number of decisions has to be made by the financial investor as the shareholder of the investee company. In a situation where the financial investor is a minority shareholder, it is of the investor’s best interest to be sensitive to the alignment of shareholders, especially with the controlling/strategic shareholder. When faced with a decision as to whether to maximize value for itself, or share value with the controlling/strategic shareholder, the financial investor should look harder to find creative solutions which can add value to both the minority and the controlling shareholder. Often times, additional investment means additional risk, and the then-current reward/risk balance should be carefully considered, including the then-current fundamentals of the investee company, and the competitive environment of the industry.

Learning Objectives

The goal of the case is to discuss the dynamics among shareholders, specifically in which founder(s) and financial investors are present. The case demonstrates the difference in thinking among shareholders within a company, and how such difference may drive the actions and decision-making process of each shareholder. The discussion will also allow student to learn about right of first refusal (ROFR) and the respective financial considerations.