Academic journal article Journal of the International Academy for Case Studies

Negotiating the Leveraged Management Buyout

Academic journal article Journal of the International Academy for Case Studies

Negotiating the Leveraged Management Buyout

Article excerpt


This finance/negotiation case was written to be used in both undergraduate and graduate courses. The instructor may adjust the rigor and depth of material to reflect the skill and background of the student audience. However, the issues are meaningful and relevant to the learning experience of undergraduates and graduates. This case is primarily designed to be used in 1) a case course in Finance Management or 2) in a negotiations course in a business or law school where an emphasis is on business negotiations rather than dispute resolution. It is an experiential learning exercise based on the application of sound integrative negotiating techniques. If the case is used in a finance course, students will negotiate using their instinctive negotiating skills. If the case is used in a negotiations course, then some background knowledge of finance as well as debt and equity financing is required. However, the case is self-contained in that the material needed to understand the necessary concepts and calculations are contained in the case. This case is designed so that it can be addressed as a discussion-based or experiential learning exercise.


As a discussion-based exercise, the case can be completed in two 50- or 75-minute classes or extended to a 180-minute class. In either format, students should have read the case and any supplementary reading assignments in advance of the class. The added cross-cultural dimension of the case should be brought out in the discussion. See Question 15 of the discussion questions.

One 50- or 75-Minute Class. In a 50- or 75-minute class utilizing the discussion-based approach, the instructor can lead the class through all or a subset of the discussion questions, or divide the class into four groups, each group taking on the collective role of each of the negotiators--Ann Blake representing the management group, Hiroki Sawamura representing Keosho Bank and Trust, Rolf Loese representing Danzig Ventures, and Adriana Tabor representing Pilar Empreendimentos (PE). As the cross-cultural aspect of the case is very significant, students should be instructed to maintain the negotiating styles of each of the roles, even though those styles may differ from their own personal styles. The negotiating styles of each of these nationalities/cultures can be found at

One 180-Minute Class. For a 180-minute class, the instructor can use the same approach as above, but with the extra time can have students break into groups to develop what they believe would be the best approach for the role they were assigned. This additional time will allow more focus on the rationale for participation by each of the players and the mathematics of making the deal work.

Two 50- or 75-Minute Classes--Session One. One class structure that has worked is for the first of two 50- or 75-minute classes (or first half of a 180-minute class) to be devoted to a combination of in-class discussion of cross-cultural elements of negotiations and/or the role of a management buyout in the life cycle of an entrepreneurial venture.

Two 50- or 75-Minute Class--Session Two. During the second 50- or 75-minute class (or second half of a 180-minute class), the instructor can conduct an in-class discussion of 1) the negotiating strategy students think would be best for each of the players, 2) the important issues to be negotiated, 3) the relative values each should place on those issues, 4) the concessions they think might be appropriate, and 5) the goals they are attempting to achieve in the final MBO agreement.


In this approach, students take on the roles of the participants in the negotiation. One or two students can be assigned to each role and, depending upon the class size, several negotiations will be taking place at one time. It usually works best to have two students share each role as they will have a better opportunity to discuss strategy, gain experience in negotiating as a team, and discuss the progress of the negotiation and possible shifts in strategy as the negotiation progresses. …

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