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Medium Capital Allocation Divestiture M&A

Goodbye Horses

#Healthcare #Pharmaceuticals
ProHub Comment

This is a sophisticated capital allocation case that combines strategic divestiture with portfolio optimization. The case requires candidates to identify which business unit to divest (Animal Health—lowest growth, misaligned with core mission), calculate the capital proceeds ($14.7B), and then apply a profitability index framework to maximize NPV across competing projects given capital constraints. Strong performance requires both quantitative rigor and qualitative risk assessment.

Estimated Time 15 minutes
Difficulty Medium
Source Duke
50 / 100
Your client is the CFO of Aperture Laboratories, a leading US biopharmaceutical company with a market cap >$150B. Aperture develops and manufactures a diversified range of products and in particular prides itself on saving millions of human lives every year. The company is under investor pressure because of its slow firm value growth over the next 10 years. Investors are very anxious to see significant changes announced at the firm in the next quarter. The CFO has already identified and evaluated a number of high-growth, promising, but capital-intensive projects, and she does not have enough cash to invest in any of the opportunities—what dose she need to do next?

Clarifying Information

  1. Unknown to the CFO until now, the business development team has retained JP Morgan to assess the sale-ability of the Animal Health business. They have identified that Aperture will likely receive a 3.5x enterprise value to sales multiple for the animal health business.
  2. If asked about taxes, tell the interviewee the deal has been structured by JP Morgan to be tax-free.
  3. If asked, tell the interviewee that the NPV includes the capital investment.