Biswajeet Pattnaik MBA Notes: 2010

A key task, when dealing with another person's anger, is to show "emotional leadership" in responding—that is, to keep from getting mad too, says Donna Earl, San Francisco, owner of an eponymous customer-service training and management company.

First, workers should acknowledge the customer's emotions, listen with warmth and empathy, and apologize, even though they didn't create the problem, saying things like, "We're sorry this happened," she says. When the caller calms down, they focus on problem-solving and promise confidently to try to help, she says.

Building a RelationshipSome customer-service workers take satisfaction in the problem-solving aspect of the job. Zane Bond, team leader at a software company's Tampa, Fla., help desk, loves identifying potential causes and analyzing them step-by-step. "I am the go-to guy for angry" callers, he says. He never takes it personally when callers vent but listens intently and tries to start building a relationship. Then he tells them confidently: "We are going to fix this."

The more stressed or frustrated callers are at the outset, the happier they are when he finds a solution.

Wednesday, September 22, 2010

A Technical Note on Exit Strategies - Tuck School, Private Equity

The Right-of-first refusal is a contractual right that gives the shareholder the option to purchase the shares before the offering is made to others.

An “exit” is the process by which founders, management and investors in a startup or growth company successfully find public or corporate buyers for some or all of the company’s shares.

The most popular exit strategies are:

• A merger with another company, either public or private

• An acquisition by another company, either public or private

• An Initial Public Offering (“IPO”) whereby a private company offers its shares to the general public through a registration process with the Securities and Exchange Commission (“SEC”)

• A private placement, whereby the company sells its securities to accredited or institutional Investors.

When deciding whether to exit or remain independent, a company’s management

and board of directors should consider several factors:

How does an exit strategy fit with the company’s original business plan objectives? A company’s ability to stand as an individual entity should not be compromised by its pursuit of an exit.

• Is the company approaching an exit in a position of strength or one of weakness? Has the marketplace dictated the need for a significantly larger scale that can be gained through an IPO or M&A or has the market

deteriorated such that being acquired is a means of survival?

• What are the financial motives behind the pursuit of an exit strategy? A successful exit strategy balances the need for additional growth capital with the need to provide returns on capital to early investors who, after several years, often seek liquidity.

• What is the risk/reward trade-off of conducting an exit strategy vs. remaining a stand-alone entity? It is important to examine the pros and cons of exiting. Does the potential for expansion and access to additional

capital outweigh potential dilution of ownership and the loss of job security?

• Is the company able to manage itself throughout the process? Execution of an exit strategy involves a significant amount of time and money, especially the IPO process. Does the company have sufficient funds to complete an exit strategy? Do the management team and board of directors have the

ability and qualifications to lead the company through this process?

(Ref: Liang, Jim and Florence, Tony, Private Equity Exit Alternatives, Morgan Stanley, November 2003)

What is the state of public markets? Public markets are volatile, and a

successful exit strategy largely depends on market timing. Many IPOs have

been pulled at the last minute at a high cost due to unfavorable market

conditions.
• What is the state of the company’s systems and controls? Before conducting

an exit strategy, a company will be subjected to a stringent due diligence

process to ensure that all of the proper systems and controls are in place. Is

the company ready for the intense scrutiny of its management and

operations that accompanies the exit process?

• What decision is in the best interest of shareholders? Evaluate the timing of

the exit – would it benefit shareholders to continue to strengthen the

company as a standalone entity and fetch a higher valuation at a later time,

or is now the optimal time to exit?

Does the business solve a particular problem, and if so, is there a large

market demanding that the problem be solved?

• How accessible is the target market?

• What kind of capital do you have/need to open access to these markets?

• What is the company’s track record in meeting or achieving goals and performance measures?

If a company is to conduct an IPO as its exit strategy, it needs to begin operating like a public company well beforehand. Some GPs note that it should be fully functional as a public company at least 2 quarters before the IPO. Even in an M&A deal, an acquirer will not want a company with sloppy controls, inaccurate financial

statements, or other questionable practices. It is important to introduce accounting, financial, and legal internal controls early on in the lifecycle to create the perception that the company is ready for public scrutiny. Some actions a company can take prior to conducting an IPO include 1) cleaning up its financial records and ensuring they are free of material misstatements; 2) creating an investor relations department to prepare to deal with investors and analysts; and 3) establishing controls to ensure the timely and accurate preparation of the upcoming disclosures required of a public company.

Furthermore, Sarbanes-Oxley has created even more rules for public companies, making it expensive and difficult to find qualified directors. For example, under this new act, five of a company’s directors must be financially literate and at least two must have had a CPA license at one point.

The cost of the legislation is meaningful and often means that a company might conduct a trade sale in today’s environment (versus an IPO pre Sarbanes Oxley). At a recent Tuck conference, one VC claimed that compliance costs shaved 4-5 cents/share from portfolio companies. A buyout firm viewed the costs for

compliance to be on the order of $1-2MM a year in ongoing efforts, depending on the size of the company, and noted that the cost of D&O insurance has also risen dramatically.

Selection of Underwriter:

During our interviews with private equity firms, general partners noted that pricing, sell-side coverage, and

company positioning are important factors to consider when choosing an investment bank. Other key questions include:

• Is the underwriting firm too large or too small to handle the size of the issuance?

• Does the underwriting firm have experience in the relevant industry sector?

• Does the underwriter have a wide client base and the ability to distribute shares to a range of institutional and individual customers?

Once a company has selected an underwriter or underwriting syndicate, a non-binding letter of intent is drafted. The letter of intent includes a description of the security, the tentative number of shares to be issued, a tentative price range, underwriters’ compensation, the type of underwriting (firm commitment or best efforts), and which expenses the company will be responsible for if the offering doesn’t succeed. The agreement does not become final until the SEC approves the issue and all parties sign a contract, binding them to the letter of

intent.

The spread is expressed as a percentage of the gross proceeds of the offering and is typically about 7%. The fee paid to the syndicate to compensate them for their expenses and risk is called the syndicate allowance. The lead underwriter also receives a percentage of every security sold, known as the manager’s fee.

The Pre- Filing period:

The preparation of the registration statement, usually the Form S-1, begins after the letter of intent has been signed.

During the pre-filing period, it is imperative that the issuing company makes no offers to sell its securities. Formal or veiled attempts at publicizing an offer to sell securities before the registration statement is filed, also known as “gun-jumping”, is strictly prohibited as it could generate demand for the issuance with potentially

misleading information.

The Waiting Period (or Cooling Off Period)

The waiting period is the time between the filing of the registration statement with the SEC and its effective date. The road show gives an indication of the demand for the new issue, but any indications of interest are non-binding. A red herring, or preliminary prospectus, can be given to potential investors. A red herring does not include any price-related information on the securities since the offering price is not set until the effective date.

A tombstone ad is also permitted during the waiting period to provide limited information on the IPO.

After the registration statement is sent to the SEC, there is a review process whereby the SEC and the company intending to go public exchange edits. Typically, the SEC takes an average of 30 days to release its initial revisions in a comment letter.

The Post-Effective Period

After the revisions have been made to the registration statement and approved by both the SEC and the company, the statement becomes effective with the SEC. During the post-effective period, offers to buy and sell may be made freely. Investors, management, and insiders owning pre-IPO shares in the issuing company

are subject to a lock-up period, typically 180 days after the IPO is declared effective, where they are not allowed to sell their shares. If insiders were allowed to sell their shares immediately, it could cause a downward spike in the company’s stock price, undermining the initial public offering price. Furthermore, pre-IPO shareholders are often limited in the amount of shares they can sell, as large sales might convey the perception to investors that early stakeholders lack confidence in the company’s future.

After the IPO

Public companies have an obligation to report matters through press releases that could have a material impact on their business, such as earnings revisions, merger/acquisition activity, or management changes.

insider trading, or trading securities based on non-public information, is strictly prohibited. Along those lines,

Regulation Fair Disclosure (“Reg FD”) went into effect in October 2000. This rule bars companies from practicing “selective disclosure” of pertinent nonpublic information. It is especially applicable to the disclosure of information to analysts and institutional investors. If information is disclosed unintentionally, a subsequent

press release must be issued 1) within 24 hours of the disclosure or 2) before the next market opening, whichever is later. There are also numerous other disclosure and corporate governance rules depending on the exchange on which the company trades.

Mergers and Acquisitions Preparation

Issues to take into account when considering merging with another company or getting acquired. • Who is the potential acquirer? A company in the M&A market should take the time to identify its own strengths and weaknesses and then compare them to those of the potential combining/acquiring company. It is important to understand what the acquirer has to offer, how these attributes would benefit the target company, and the motive behind the desire to merge or acquire. Common motives behind the pursuit of a merger or acquisition

include the following:

􀂃 Strategic: the target company has a technology or service that the acquirer cannot or will not build or develop on its own.

􀂃 Defensive: the target company offers too much competition or is stealing too much market share from the acquirer.

􀂃 Financial: the purchasing entity needs the target company to strengthen its financial statements.

􀂃 Growth: a financial conglomerate has the capital, a well-developed distribution network, and certain expertise to further develop an existing company.

• What will be the impact on the target company’s business? When considering M&A activity, it is necessary to assess whether or not the combination will enhance the target company’s core competencies. Will the

acquirer provide the target with the best opportunity to expand and gain additional market share? Are the founders and initial shareholders ready to relinquish their leadership and control of the company if necessary?

• What will be the impact on the management and employees? Retention of key management and personnel can be critical. Furthermore, employees often become nervous upon hearing rumors of M&A activity within their own companies, especially since it can lead to downsizing and layoffs. In fact, studies found ‘employee problems’ as being responsible for between one-third to a half of all merger failures.10 If downsizing must occur, it is important to conduct it in a sensitive manner as it will affect the morale and loyalty of existing employees.

• How will a merger/acquisition impact investor returns? M&A activity is the exit strategy of choice in today’s economic environment, partially because it usually allows investors to exit faster than an IPO. However,

competition among acquirers has declined in recent years, allowing buyers to shop around and negotiate cheaper deals, resulting in lower returns for early investors.

Dutch Auctions

Dutch auctions have recently been brought to the forefront given the highly publicized Google IPO. W.R. Hambrecht introduced the OpenIPO, a Dutch auction, in 1999. Since then a handful of companies have used the process to go public including Peets Coffee & Tea and Overstock.com. In a Dutch auction, a company reveals the maximum amount of shares being sold and sometimes a potential price for those shares. Investors then state the number of shares they want and at what price. Once a minimum clearing price is determined,

investors who bid at least that price are awarded shares. If there are more bids than shares available, allotment is on a pro-rata basis--awarding a percent of actual shares available based on the percent bid for--or a maximum basis, which fills the maximum amount of smaller bids by setting an allocation for the largest bids. It remains to be determined whether the Dutch auction method will become a popular alternative to the traditional IPO.

Monday, September 20, 2010

Resume and Interview Tips from Aditya Birla Site

Aditya Birla site

Resume tips.
• Be as concise as possible in the resume without omitting any
important details. Remember that your resume is not an essay writing competition. The recruiter will read it for less than a minute. You have less than a minute to catch the recruiter's eye
• All achievements aside, your resume should be reader - friendly. Important points should be highlighted in bold. Ensure that the resume does not become too glossy
• It is surprising to note that a number of students fail to proof - read their resume for grammatical mistakes. It reflects poorly on the applicant if any grammatical errors are found on his/her resume
• When you write about your projects/hobbies in your resume, it is expected that you know everything that there is to know about it. If you mention that you have done a project on a particular topic and are not able to talk about it or answer questions on it, it shows the hollowness of your preparation and lack of interest in the organization
• A resume can be used smartly to LEAD the interview into your area of comfort. Else it may divert into areas in which the interviewer is very comfortable and you might find yourself clueless
• Take feedback from others about your resume. They will be able to give you an unbiased opinion

Interview Tips:
• Research
Before attending the interview, ensure that you have all information about the company including its product range, businesses in which it operates and recent news features. Being informed revels that you are keen enthusiastic to join the company
• Body language
Always maintain eye contact with the interviewer. It reveals your confidence. Never droop in the chair. Sit upright and keep track of your hand movements while answering questions
• Prepare for basic open - ended questions
The interview is a process by which the interviewer can judge whether you match the requirements both academically and as a person. Generally, the interviewer will throw up some open - ended question like "Tell me about yourself". This is meant to relax the applicant. This can be used as an opportunity to divert the interview into your areas of strength
Open - ended questions like those on hobbies, achievements, etc reveal a great deal about you as a person. Treat these questions very seriously
• Listen
Listen to the question before answering it. Understand what the interviewer is looking for. If you need time to think about the answer, request for the same. Most interviewers would comply with such a request. But after you have taken time to think, better come up with a good answer
• Ask questions
Generally, the last question of the interview is "Do you have any questions about the company?" Use this opportunity to ask something relevant about the company. If you do not ask any questions at this point, chances are that you may come across as a person who is not keen to join the company
• Be yourself
Do not try to be someone you are not during an interview. Be natural. An interview is a process by which the candidate and the interviewer get to know each other and the candidate's role in the organization is established. Any mask that you may don for the interview will wear down in no time
• Mock interviews
It is always a good idea to attend mock interviews and use the feedback to improve your interview skills
Group Discussion Tips:
• Stay calm
It is seen that many group discussions degenerate into a fish market. This is because the participants lose their sense of calm. They panic either due to the topic under discussion or due to other participants. Regardless of what the situation may be, it is important for you to maintain your composure. Stay calm in the face of adversity is the main quality of a leader
• Meaningful contribution
Some participants enter a group discussion with the impression that the more they talk, the greater is the chance of being selected. This cannot be further from the truth. How long you talk is irrelevant, what you talk is important. Repeating the same points over and over again shows the lack of content in the candidate
• Reaching consensus
Decisions in real life business situations are normally taken by a team. It is a case of give and take. Flexibility in your thought process is crucial. Being adamant on a point just because you do not want to be seen as backing down reflects very poorly on the individual
Understanding the other person's point of view is very important. If you feel strongly about what you believe in, push forth your point but in the form of clear reasons. Repeating the same point serves no purpose. It is well known that in a group discussion, reaching a consensus is extremely difficult. The fact that the group reached or did not reach a consensus is not relevant to your being selected. What is of relevance is what you did in order to try and reach a consensus
• Be seen
Regardless of how many points you may have, unless you ensure that the group and the evaluators hear them out, they remain just what they are - ideas. To make them count you have to ensure that you are heard. Rarely will anyone gift you with an opportunity to speak. You will have to create that opportunity. And once you get that opportunity, make it count
• Listen
Some candidates have so many points to put across that they find the time limit too short. So they end up occupying a lot of airtime. This shows favourably in terms of knowledge but is a poor commentary on team skills. In most business situations, decisions are seldom taken independently. You have to let others express their point of view

Sample open ended questions for interviews.
• Tell me about yourself
• Tell me about your background and accomplishments
• What are your strengths and weaknesses?
• How would you describe your most recent job performance?
• What interests you about our company?
• What outside activities are most significant to your personal development?
• Why should we hire you?
• What are your career goals?
• Do you consider yourself a leader or a follower? Why?
• Describe your greatest accomplishment in life
• Describe your greatest failure in life
• What is your favourite subject?
• What are your hobbies/interests?
• Where do you see yourself five years/ten years down the line?
• How would your closest friend describe you?
• How would your greatest enemy describe you?
• Why did you join this B-school?
• Why did you pick up this stream?
• Describe a challenging situation that you had to face and how you dealt with it
• What motivates you

The Great Debators

Defeat makes me Stronger.... Great Debaters

Strategic Negotiation and Conflict Management

Parkson Gibson

Do not tell your offer and Book value first.
Do not stick to a number. Avoid anchoring around a number.
First call should be carefully decided.
Bluff, don't show your cards, Ask interests. Try and find the BATNA of the counterpart.

BATNA: Best alternative to a negotiated agreement

Tale of Star crossed Lovers

Listen and ask questions. Seek intentions.
Do not make assumption
Understand the Question, positions and Interests
Listening is the biggest skill
Silence is very loud

Use words carefully,'should' and 'could' are words reminding Moral code.

Conclusion:

Know your BATNA
Plan your strategy
Be modest and humble of how much you know
Weigh offers carefully
Offer carefully
Avoid Winner's Curse

Saturday, September 18, 2010

Your perfect pitch - By Dawn Klingensmith

» An elevator pitch should be free of buzzwords and jargon. “As a career counselor, I’d lead with, ‘I make people feel good about what they’re doing with their lives,’ instead of ‘I facilitate executives’ career transitions following layoffs,’” says BrightSide’s Cliff Flamer.
» Focus on one area of expertise. “It’s a mistake to try to position yourself as a generalist or a Jack of all trades, because it comes across as ‘master of none,’” Summit Consulting’s Allen says.
» Adapt your pitch to suit the audience. “Prepare a pitch for every niche,” Allen says. “If you excel in three areas, develop three different pitches. By asking what the other person does first, you’ll know
which one is relevant.”
» Go easy on adjectives. Too many means your pitch probably isn’t concrete enough—and may come across as self-aggrandizing.
“Instead of saying, ‘I’m hardworking,’ say ‘I value hard work.’ That statement takes on more credibility because you’re not bragging, but merely stating a core value,” says DeAnne Merey, president, DM
Public Relations, New York.
» Your pitch should persuade people to like you. “The reality that my
clients don’t like to hear is that people hire who they like,” Allen
says. “They don’t always hire the person with the most impressive,
relevant résumé.”

A compelling elevator pitch leaves a lasting impression, sometimes through the element of surprise, Howell says. For example, one of her clients, a massage therapist, describes herself as a “body detective” because she pinpoints the cause of chronic pain. “It’s a surprising way for her to capture attention and then talk about
the specific benefits she provides,”

Smart things to know about Strategy: Richard Koch, Summary Notes, Last Chapter

• Think Differentiation:
‘Principle of Competitive Exclusion’ – Biologist Gause
Different species in a closed jar c operate and survive for food. Same Species fight and die in the competition.
• Know your Key idea:
Assumptions that shape the organization’s behavior. Customers / Competitors / Technology and its dynamics / Strengths / Weakness ----- Peter Drucker’s Theory of Business
• Think Leadership
• Think Customers and talk to them (People accept it intellectually, but seldom practice it)
• Think Competitors and talk to them. Manage competitive rivalry constructively. Collaborate as long as it is possible and legal.
• Think Economics
• Think Big: How can you change the rules of the game in the business?
• Focus : Use 80 / 20 principle. Resource allocation is at the heart of the Strategy.
• Think Value; Manage Value, not the numbers: Resist the temptation of managing numbers and not value.
• Experiment : Use the Market
• Cut the losses early
When the market has proclaimed the move dumb, pay heed. Loyalty to colleagues, reluctance to admit the mistake, belief that perseverance is a virtue, laziness to admit the mistake, groundless optimism, and a wish to rock the boat – all these conspire to make organizations ignore their mistakes.
• Look for unexpected success
• Build on success; don’t correct the weakness
Avoid the difficult challenges. Go for the success. And only do things that play to your own strengths
• Develop strategy in action
Be dynamic
• Have a mental map of where you are going
• Reflect and think, even as you act
Movement is not intelligent action. Only action designed to get you somewhere is worthwhile. Think while you act. If this is impossible, prefer thought to action.
• Take responsibility, have a Cause, be a Leader
• Finally, encourage all executives to become Leaders
Daily Habits of Smart Strategists:
• Spend some time each day thinking: Think what information you need? What actions will drive
• you to success? Another excellent habit is exercise for an hour; it gives u time to think.
• Refill the Creative Hopper: Spend some time each day absorbing the nutrients of creativity – stimulating conversations, visual arts, music, watching a film
• Don’t waste time: A smart way of not wasting time is not to be there where time is wasted. Don’t do things that wouldn’t do if you were in business on your own account.
• Prepare for Meetings and keep them short:
• Talk to Customers today or tomorrow
Special Advice to CEOs in developing Strategy
• Don’t decide Strategy too quickly, if you are new
• Consult widely, collect opinions across all levels
• Surround yourself with people who disagree with you. This is more difficult than you imagine
• Don’t decide anything to do with strategy until you have talked to Customers (existing / new ) or Competitors
• Don’t move faster than the organization can deal with. Don’t leave your customers behind. Wait for them to lead you on. Then strike.
For non executive members
• Don’t overestimate your knowledge for the company.
• Indulge in Brainstorming and not blamestorming.
For Line Managers
• Don’t let anyone take it away from you. Take responsibility even when it is not clear that you have authority
• Remember to break things down in to Competitive segments.
• Remember to establish for each segment , whether or not u have competitive advantage
• Always tell the Head Office the truth
• Always spend two days a week with customers
‘Take a chance! All life is a chance. The man who goes the furthest is generally the one who is willing to do and dare’. Dale Carnegie