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Medium Decision Analysis Capital Allocation Divestiture

Goodbye Horses

#Healthcare #Biopharmaceutical
ProHub Comment

This case tests the candidate's ability to make strategic capital allocation decisions under constraints. The key insight is recognizing that divestiture of a non-core, low-growth business unit (animal health) is the optimal solution to raise $14.7B to fund high-NPV projects, requiring both quantitative analysis (profitability index calculation) and qualitative judgment about business fit.

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 several high-growth, promising, but capital-intensive projects, and she does not have enough cash to invest in any of these opportunities. What does she need to do next?

Clarifying Information

  1. If asked about taxes, tell the interviewee the deal has been structured by JP Morgan to be tax-free
  2. If asked, tell the interviewee that the NPV includes the capital investment