Bank Waal En Ijssel

SUBJECT AREAS: Investment banking, private banking, management buyouts, value based strategy.CASE SETTING: 1994; The Netherlands; Investment bank.The purpose of this case is to illustrate value based strategy in an investment bank. Specifically, what is the value of entering more fully in the Dutch MBO business? In addition the case allows the student to discuss the value of potential synergies between different business units (Corporate Finance, Corporate Banking and Private Banking) within the context of MBOs. The case illustrates how an investment bank can look at its own businesses employing the same techniques (DCF) its Corporate Finance division normally uses to analyse its customers. The case was developed for a specific bank within the context of a Senior Management programme at INSEAD. The data provided by the various business units have been modified. Many of the comments in the case were actually made during the seminar. The case works well for executives and MBA students with an interest in the investment banking industry. Prior to this case, the instructor may want to use a case that discusses MBOs from the point of view of an investment bank, so that students understand the basic value drivers ofthe MBO business. The case is supplemented with a spreadsheet which shows the sensitivity of the value of the MBO business to various value drivers: the riskiness of the MBO business, market growth, time spent launching a successful deal, loan takeup, market share by value, market share by number of deals, rate of return on equity stakes and any side benefits to the private banking business. These side benefits to private banking are estimated through a separate spreadsheet which values a client in private banking. The value of the client is a function of his wealth, his risk aversion (which determines his portfolio mix between liquidities, bonds and equities), his consumption preferences (which determines the growth in his portfolio), his turnover, his loyalty (which determines the life of the portfolio) and the time spent managing the client's account