Description

Fall 2019

Please work on these problems in an excel file (a template is provided). Each problem should be an individual tap. Name the tap with the problem number, for instance, problem 1, problem 2, etc.

Private Equity Return (20)

The contractual lifetime of ABC Growth Fund is 8 years. It has made majority of its investments in the first five years and started realizing returns in the next five years. Here are the cash flow data related to the investments of ABC Growth Fund. Calculate its cash-on-cash return and IRR upon the liquidation of the fund. All amounts are in millions.

A.    What is the cash-on-cash return and IRR from each investment? (5)

B.     What is the equal weighted cash-on-cash return and IRR of ABC Growth Fund’ whole portfolio? (5)

C.     What is the value weighted cash-on-cash return and IRR of ABC Growth Fund’s whole portfolio? (5)

D.    What is the pooled IRR of ABC Growth Fund’s whole portfolio? (5)

2. Assessing and Valuing GENEDATA (42)

A new analyst for a large venture capital firm, you are anxious to demonstrate the skills you learned in your Entrepreneurial Finance course and prove that you are worth your attractive salary. Your first assignment is to analyze the value of a startup company “GENEDATA”.

Background of GENEDATA

Genedata was spun off in 1997 from Novartis, the global pharma giant created from the merger between Ciba-Geigy and Sandoz the previous year. The founders, most of them computational bioscience specialists formerly part of the Central Research Unit at Ciba-Geigy, decided to provide integrated solutions to the global bioinformatics market, focusing on data analysis applications for genomics research. Its offering differed from its competitors by the ability to provide an integrated service pack, including system support, software development, technology transfer, data analysis and consulting, and specifically addressing the customers’ needs. Genedata had also come away from Novartis with some important customers, including Norvartis itself, Bayer and Boehrigner Ingelheim.

Management

Genedata’s staff consisted of scientists with backgrounds in mathematics, statistics, physics, computer science and molecular biology or biochemistry. The team had superior expertise in these various technical areas which, combined, represented a very potent mix. On the other hand, business development and marketing skills were becoming critical for the company, and these areas were still in short supply.

Market

Competition in bioinformatics included four public companies and more than a dozen private ones. Geographically, Genedata focused on the European market (mainly Switzerland, Germany and Austria) where it targeted commercial as well as non-profit research companies. Genedata differentiated itself by providing an integrated service package, including system support, software development, technology transfer data analysis and consulting. Most other players in the field were research institutions, with limited business expertise. US bioinformatics firms had sor shied away from the European market. A more serious threat came from manufacturers of bio-chips, small “laboratories on a chip” that would allow most bioinformatics processes to be carried out automatically, with very high speed and in a controlled environment.