EM and Presentation Guidance Questions 
EM and Presentation Guidance Questions
BW/IP
1. Was Borg-Warner’s Industrial Products Group a good candidate for a leveraged buyout in 1987? Evaluate the price paid and the structure of the deal that closed in May 1987. Are you optimistic about BW/IP’s prospects?
2. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable?
3. How do the various features of the BW/IP buyout affect the company’s decisions about long-horizon opportunities such as the UCP acquisition?
4. What are the advantages and disadvantages of the 1987 buyout, viewed as a financial program?
5. As one of BW/IP’s bankers, would you approve of the company’s request for a waiver of covenants and financing of the UCP acquisition?
Netscape’s IPO
1. Why has Netscape been so successful to date? What appears to be its strategy? What must be accomplished if it is to be a highly successful going concern in the long run? How risky is its current competitive position?
2. Does Netscape need to go public to satisfy its capital needs? What would you estimate might be the magnitude of its capital needs over the next 3 to 5 years? What sources other than the public equity market could be tapped to satisfy those needs?
3. Why, in general, do companies go public? What are the advantages and disadvantages of public ownership?
4. The case points out that the IPO market is sometimes characterized as a “hot issue” market and that many IPOs are viewed in retrospect as having been “underpriced.” What might explain these phenomena? Should the Netscape board be concerned about underpricing? Why or why not?
5. Can the recommended offer price of $28 per share for Netscape’s stock be justified? In valuing Netscape, you might find it helpful to use the following assumptions:
I. Total cost of revenues remains at 10.4% of total revenues;
II. R&D remains at 36.8% of total revenues;
III. Other operating expenses decline on a straight-line basis from
BW/IP
1. Was Borg-Warner’s Industrial Products Group a good candidate for a leveraged buyout in 1987? Evaluate the price paid and the structure of the deal that closed in May 1987. Are you optimistic about BW/IP’s prospects?
2. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable?
3. How do the various features of the BW/IP buyout affect the company’s decisions about long-horizon opportunities such as the UCP acquisition?
4. What are the advantages and disadvantages of the 1987 buyout, viewed as a financial program?
5. As one of BW/IP’s bankers, would you approve of the company’s request for a waiver of covenants and financing of the UCP acquisition?
Netscape’s IPO
1. Why has Netscape been so successful to date? What appears to be its strategy? What must be accomplished if it is to be a highly successful going concern in the long run? How risky is its current competitive position?
2. Does Netscape need to go public to satisfy its capital needs? What would you estimate might be the magnitude of its capital needs over the next 3 to 5 years? What sources other than the public equity market could be tapped to satisfy those needs?
3. Why, in general, do companies go public? What are the advantages and disadvantages of public ownership?
4. The case points out that the IPO market is sometimes characterized as a “hot issue” market and that many IPOs are viewed in retrospect as having been “underpriced.” What might explain these phenomena? Should the Netscape board be concerned about underpricing? Why or why not?
5. Can the recommended offer price of $28 per share for Netscape’s stock be justified? In valuing Netscape, you might find it helpful to use the following assumptions:
I. Total cost of revenues remains at 10.4% of total revenues;
II. R&D remains at 36.8% of total revenues;
III. Other operating expenses decline on a straight-line basis from