A year ago, I wrote a blog post for Cornell Johnson, that I want to repost here. I discussed my class's awesome opportunity pitching alternative strategies for Mondelez's Corporate Development team. This year's Investment Banking Immersion students will have the opportunity to pitch Under Armour's CFO, and I am stoked to see what they will conjure up. Now on to my post...
The Final Push
Eight Investment Banking Immersion (IBI) presentations done, one last presentation deck to go. Strategic Alternative week was upon us, and it was time to utilize the skills and tools we learned throughout the semester. Every team was tasked with making a strategic recommendation to Mondelēz – a Fortune 500 company with the resources and capabilities to execute almost any creative deal we could conjure up.
During “Pitch Me a Deal” in the prior week, I realized that ambiguity was not an easy space to work in, which was great preparation for this final pitch. There were a couple avenues we could pursue: discuss a bond or equity offering, which we covered during our first and second presentation, or pitch a potential acquisition, which was our fifth and sixth presentation. Whatever direction we ultimately chose, I knew we would be able to pitch it, because every week, my classmates and I had been:
Deep diving into specific industries and subsectors
Blindly building financial models and sifting through company financials
Formatting and aligning slides for our presentation decks
Answering and addressing questions from Drew Pascarella, TAs, and alumni panelists
Mondelēz International is an international confectionery, food, and beverage company that originally spun out of Kraft Foods back in 2012. They are known for their powerhouse brands including Chips Ahoy!, Oreo, Triscuit, Toblerone, Trident, and many others. Mondelēz is known for acquiring “Power” brands which they plug into their far reaching distribution channels. The company faces a snack industry that has seen stagnant growth and a major shift towards healthier and organic snacks. Simultaneously, consumers are snacking more often throughout the day, while looking for more nutritional value out of their snacks.
*Market research...
Understanding that larger players in the food industry lean towards acquiring rather than developing brands inhouse, most IBI teams looked for attractive targets for Mondelēz to acquire. The ideas ranged from buying companies such as Hostess Brands or Atkins to companies as large as J. M. Smucker. The pitches also incorporated strategies focused on broadening offerings to shifting into pet food distribution.
Our Pitch: Hain Celestial Carve Out
Our team decided to double down on Mondelēz’s core competency: snacks. We felt Mondelēz should tap into the healthy eating trend and begin building out their offerings in this growing segment. Targeting Hain Celestial Group (NASDAQ:HAIN), an organic and natural products company, we focused in on their healthy snacks division. The Terra (think colorful veggie chips) and Sensible Portions (think fruit and veggie straws) brands are great anchors to build around, given their strong brand recognition and established market position.
*Nick, Kevin, Andrew, Cory, and I pushing on
Once we had our idea, we needed to build an enticing story and find a feasible way to execute this idea. We listened to earnings calls, dug through financials, and read analyst reports, looking for reasons why HAIN would be willing to sell their Snacks division. Activist investors had already stepped in, looking to divest their Protein’s division, and management also claimed to not be the ones capable of scaling HAIN to the next level. We decided to build a Sum Of The Parts valuation, breaking out each segment’s revenue/EBITDA (Tea, Snacks, Personal Care, etc.), and then applied segment specific multiples for each division. We found that the Hain Celestial would be worth more broken up than as a combined entity. Finally, given how small HAIN’s snacks division was, the company was struggling to negotiate with their distributors (i.e. Walmart), so we felt management would be on board with parting with these brands.
Showtime
There was another level of excitement and anxiety around this week’s submission. The deadline was 5PM instead of midnight, and you could see various teams in Breazzano and Sage Hall scrambling to put the finishing touches on their final deliverable. Ultimately, Drew chose three teams to make their presentation to Mondelēz’s senior Strategy and Corporate Development teams. That Sunday night, while we waited for the final selection, breaking news hit that Mondelēz would be buying Tate’s Bake Shop for $500 million. Students complained about having wanted to pitch Tate’s, given how popular their cookies have become, but they were private so there wasn’t sufficient financial data…
Three teams presented their proposals, it was evident that they had thoughtfully selected their targets and meticulously modeled out the mechanics of each deal. As the clients asked probing questions, I was proud of my classmates for standing their ground, addressing each comment and concern that was thrown their way. Several times, the clients took control of the presentation, asking for specific information, but the teams were able to steer the conversation back to their narrative. My classmates made compelling suggestions and received valuable experience presenting to a “client.”
They Mondelēz team provided some valuable feedback to us all. They could tell we were focused on our models, making sure the numbers were accurate. However, they said, “Getting the story right is more important than finding the perfect accretion dilution numbers. If you don’t get the narrative right, correct numbers are a moot point. You build trust and credibility with a client by demonstrating industry knowledge and understanding the client’s specific needs and positioning.”
Ready or not…
We thanked the folks from Mondelēz for taking time out of their chaotic schedules to listen to our presentations. It is an experience that better prepares us as we hone our craft. Drew structured the IBI to be rigorous, ensuring that week in and week out, we are developing the necessary skills to succeed in our internships. Are Johnson students ready to hit the Street? When our warmup is synthesizing and presenting a strategic alternative to senior members of a Fortune 500’s Strategy and Corporate Development team, I can say we at least get the butterflies out.
As we close out the semester, my classmates are sentimental about finishing the Investment Banking Immersion. We had high expectations, and they were clearly exceeded. However, I gently remind them that we have 10 weeks of IBI pt.2 coming up as we round into our summer internships…
All of us have one goal in mind. Convert. Surpass last year’s record.
There is no doubt in my mind that the class of 2019 will do that.
******Update******
Out of the 57 students that interned in Investment Banking, 53 of them are going back full-time upon graduation. This is the highest absolute number and percentage in school history.