Week 11: The century-old "Kohazeya" faces a liquidity crisis, and the global giant Felix has made an acquisition offer.
You are the Chief Strategy Consultant for President Miyazawa. Your mission is to leverage financial data and negotiation tactics to fight for the dignity and survival of this historic firm.
Felix's Offer: 300 Million Yen. Is this an insult, or reality?
President Misono (Felix): "Mr. Miyazawa, look at reality. Your machines are broken, inventory is obsolete, and the factory land in the countryside is worthless. 300 million yen is a premium based on your Book Value. The bank syndicate agrees this is fair."
! ADVISOR ALERT: The opponent is using the "Past" to price the "Future." We must prove Kohazeya's value is not on the ledger.
Note: Book Value is merely Assets minus Liabilities on the balance sheet. It often ignores brand reputation, patents, and human capital.
Select 3 items from the asset cards below that classify as "Intangible Assets". Drag (or click) them to the right side of the valuation scale to prove the Enterprise Value exceeds 300 million.
Numbers don't lie, but they tell a brutal story.
Consultant Note: The banks are rushing us to sell because, based on Kohazeya's last three years of financial statements, we are in the ICU. Interpret these basic figures first; they are the foundation for the AI valuation you will request in Act 2.
| Item (Unit: Million JPY) | t-3 (3 yrs ago) | t-2 (2 yrs ago) | t-1 (Last Year) | t0 (Estimate) |
|---|---|---|---|---|
| Revenue | 2,500 | 2,400 | 2,100 | 1,800 |
| Cost of Goods Sold (COGS) | (1,800) | (1,750) | (1,600) | (1,400) |
| Gross Profit | 700 | 650 | 500 | 400 |
| Operating Expenses (OpEx) | (600) | (600) | (580) | (550) |
| R&D Expenses (Rikuoh) | 0 | (20) | (100) | (150) |
| Net Income | 60 | 18 | (120) | (250) |
* Note: Heavy losses in t-1 due to Rikuoh R&D investment.
Formula: Current Assets / Current Liabilities. Measures short-term ability to pay debts. (Use t0 data)
Formula: (Net Income / Revenue) * 100%. Measures profitability. (Use t0 data)
Historical data is ugly. So we use the "Future" to persuade our opponent.
President Miyazawa: "If we secure funding, I have three directions. Please calculate which path creates the highest NPV (Net Present Value), giving us the confidence to reject the 300 million offer."
// Please copy the command below and paste it into ChatGPT/Claude/Gemini
The devil is in the details. Felix has submitted the Term Sheet. Identify clauses that threaten control.
President Misono: "The price is negotiable, but these are our standard terms. We hope to sign quickly."
As a consultant, review the following 5 key clauses. Decide to Accept or Reject and state your rationale. Your judgment determines if Kohazeya becomes a vassal.
"The Board shall consist of 5 members: 3 appointed by the Investor (Felix), and 2 by the Company (Kohazeya)."
*Consultant's Note: The board hires/fires the CEO and approves major decisions. Majority = Control.
"Founding family members are prohibited from engaging in any footwear-related business for 10 years after resignation or stock transfer."
*Consultant's Note: "Restrictive Covenants" limit what you can do after leaving. 10 years is unusually long.
"The Acquirer guarantees to maintain current employment contracts and salary structures for all Kohazeya employees for 3 years post-transaction."
"If the Investor (Felix) decides to sell the company to a third party, founding shareholders must sell their shares under the same terms without objection."
*Consultant's Note: This forces minority shareholders (you) to sell the company even if you don't want to.
"The Company shall provide unaudited financial statements and operational reports to the Investor within 30 days after each quarter."
Don't just say "No." Propose a Counter Offer they can't refuse.
President Miyazawa: "I will not accept being swallowed whole. We need funds, but we also need dignity. Design an alternative for me."
Based on the valuation in Act 2 and clause analysis in Act 3, complete the Term Sheet Proposal below.
Hint: Will you choose Licensing, Minority Investment, or an Earn-out (performance-based payment)? What are the specific terms?
Why is this good for Kohazeya? And why would Felix accept it? (Win-Win Analysis)
Review the AI simulation in Act 2. If the Discount Rate (WACC) rises from 12% to 20% (indicating the market sees Kohazeya as high risk), what happens to the NPV? Explain the underlying financial logic (Time Value of Money / Risk Premium).
Felix threatens: "If you don't accept 300 million, we'll develop similar tech ourselves and crush you."
Using the BATNA (Best Alternative to a Negotiated Agreement) concept, write a ~50 word response showing we have options other than "accepting the merger" (e.g., mentioning Atlantis's competitors or bank financing).
Match the colloquial description to the correct technical term.
1. "When the company is liquidated, I get my principal back first, then split the rest." -> ?
2. "If I sell the company, you are forced to sell your shares too." -> ?
🎬 Plot Focus: To raise funds for Rikuoh equipment, Kohazeya must create immediate cash flow. President Miyazawa decides to develop a new product—"Ashigarai Taisyo". The pricing strategy, cost structure, and expected sales volume of this product will determine the company's survival.
Pre-class Thought
If you were President Miyazawa, how would you price "Ashigarai Taisyo"?
(A) Cost Leadership (Low Price)
(B) Differentiation (Premium Price)