Monday, March 31, 2008

Harvard Case Study: The $15 Trillion Deal

You are a business man. What would you do to get a piece of a $15 trillon dollar deal? Well, you probably couldn't get all of it - likely only a percentage, maybe, at the top end, 12.5% - due to expenses and other royalties. And then you'd probably only see it over 40 years. Still that's close to a cool $50B a year, not bad.

It gets better. You also know that the deal may appreciate over time because the business is dealing with a commodity that's in hot demand and getting hotter. You also think that you might be able to find an extra $10 to $20 trillion hidden in places people haven't looked at yet. You already know how good the product is - you use this product already on a daily basis.

But the problem is that you'll have to resort to hostile takeover - which could be perceived as unscrupulous. Luckily, the owner of this family business is an asshole - the business community and the employees will likely think you're an improvement. The employees are sure to be impressed with your brand and their prospects.

No doubt, the hostile takeover is sure to raise the ire of the community and competition - who knows what tactics those bastards will resort to. However, if you play your cards right, you might scare the belligerent competition next door, who has a pretty nice setup already - maybe enough to take over their business in a future hostile takeover.

Because you know that you'll have have to really invest deeply the first 5-10 years to get the business working the way that you need, top most in the back of your mind are your shareholders. You know that your shareholders will get nervous and vocal as time ticks on - they don't want to see employee turnover or investments without return. On the other hand, you realize that if you don't go after this, it might be a problem in the future for your francise, because you're getting killed on your traditional businesses. Lots of new low-cost competition - the shareholders are already restless over this.

How much time would you be willing to invest - is 100 years unreasonable? How much money would you be willing to invest - is $500B/year unreasonable for the first 10 years? Could you resort to frightening your shareholders with stories of bearded boogeymen if they didn't do the deal? You think you can get your cousin to invest?

Saturday, March 29, 2008