BlackstoneCeleaneseSimulation - Blackstone/Celanese...

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Blackstone/Celanese Simulation
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Overview Each role has its own objective in the game: The Blackstone objective is to get a deal done within the parameters established by the Blackstone investment Committee The Celanese objective is maximise value for Celanese shareholders while taking into account the interest of other stakeholders such as pension scheme members.
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Overview Explanation of the rounds: First in-class session: Play Round 1: After reading through the materials in the “Prepare” section, each role completes an initial valuation of Celanese and settles on a reservation price (which is not seen by the opposing team) Second in-class session: Play Round 2: Both teams conduct due diligence and update valuations and reservation prices Third in-class session: Played Round 3: Teams negotiate face-to-face in class and potentially agree to a deal. If both parties can not agree, the simulation ends here. If agreement is reached the deal goes back to the Celanese Board and the Blackstone investment committee for final approval. Some renegotiation may be necessary.
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Pointers for Playing the Game During your first in-class session you should 1. Carefully review the valuation models and how they work. 2. Explore how various operating assumptions affect the values in the models 3. Learn how the information in the various tabs is related. 4. Come up with a reservation price
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Pointers for the Blackstone Groups The key questions you should ask In what ways does the deal create value for investors? What is a reasonable premium over the current stock price? What will be the requirements of the Celanese board to accept the offer? What would be the requirements of the various Celanese stakeholders?
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Pointers for the Blackstone Groups The key questions you should ask How much post-transaction cost cutting is Blackstone likely to require to achieve its desired returns? Will the employee representatives of the board be happy with the proposed terms? Remember the board and the shareholders of Celanese expect the management to think carefully about the firm’s value, both as an independent entity and in the context of its value to Blackstone.
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Operating Assumptions The first item under the “Analyze” tab is the operating assumptions/forecasts for Celanese over the next 5 years. These are the parameters that Blackstone aims to improve through their restructuring of the firm, e.g. Sales, Margins, other expenses etc. You are in control of most of these parameters and must decide on them. Learning how each of these variables drives the valuation of Celanese (understanding their sensitivity to valuation) will help you decide which items to spend your due diligence budget on.
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