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Medium Strategic Decision Financial Analysis Merger & Acquisition

Goodbye Horses

#Healthcare #Biopharmaceutical

Practice this intermediate strategic decision case interview question in the Healthcare sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

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 26 minutes
Difficulty Medium
Source Duke
19 / 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
Mock Interview
Interviewer

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?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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The CFO of a $150B+ biopharmaceutical company needs to raise capital for high-growth projects. The solution involves divesting the animal health business unit (valued at $14.7B using a 3.5x EV/sales multiple) and strategically reinvesting the proceeds into the three projects with the highest profitability index (GLP-1 agonist, new formulations, and cost-cutting) to generate $22B in NPV.

Key Insights:

  1. Capital raising methods include equity, debt, divestiture, and fund reallocation; divestiture is optimal here due to the non-core nature of animal health
  2. Use profitability index (NPV/capex) to rank projects when capital is constrained—this prioritizes efficiency over absolute NPV
  3. The animal health unit is the best divestiture candidate because it has low growth, low specialization requirements, and misaligns with the company’s mission of saving human lives
  4. Tax structuring and deal timing are critical operational considerations in executing the strategy
  5. Investor pressure for significant announcements necessitates bold strategic action rather than incremental cost-cutting

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