Buyout Bout

Berkeley-Haas Takes 3rd Place in Wharton Buyout Case Competition

Leveraging talent: MBA 12s Derek Simmons, Allan Riska, Jonathan Stull, and Serge Stanek (Not pictured: Zoe Zhu)

Pity the poor valentines of Team LTO Capital: This crew of dedicated Berkeley MBA students shunned the flowers-and-candy fest to spend February 14 developing a full LBO valuation model.

The choice paid off when Allan Riska, Derek Simmons, Serge Stanek, Jonathan Stull, and Zoe Zhu, took third in the Wharton Buyout Case Competition, placing ahead of such schools as Columbia, Wharton, Kellogg, LBS, and NYU in the Feb. 18 contest. Haas also placed third in 2010.

The competition simulates a real-life private equity buyout—the acquisition of a company using equity and significant amounts of debt. Asked to develop an investment thesis and Leveraged Buyout (LBO) valuation for video game retailer Gamestop, the Haas team said no-go. “From our research and discussion with gaming experts, we anticipate a shift to digital distribution (downloads) for videogames in the coming 3–5 years, which will make Gamestop’s retail business obsolete and a later exit through IPO or strategic sale impossible,” says Stanek.

The team impressed the judging panel of private equity pros with a strong and concise presentation and a thesis backed up by data and expert opinions, according to Simmons. “We definitely stood out for our industry knowledge, developed by talking to experts from companies like EA Games and Microsoft/X-Box—all contacts pulled from the Haas network within three days.”

And three days is just how long the students had to conduct research, develop the valuation model, and put together an investment committee presentation, “work normally done in 1–2 weeks by a private equity firm,” observes Stull. Team LTO Capital used the time to gather input from the Haas Investment Club, which had analyzed Gamestop’s stock, and from the Haas Technology Club, which provided gaming insights and alumni contacts in the industry.

Lecturer Peter Goodson and GSI Jonathan Groll coached the team members, who also credit a dry run competition held by the Haas School’s Private Equity Club. The new club, says Simmons, who serves as president, has offered practitioner chats with leading industry professionals and “generated an amazing amount of interest within the PE community.”

Sweet.

Who makes you proud to be Berkeley-Haas? Tell us in the comments below or share your stories with vgilbert@haas.berkeley.edu.

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