Stuart Gilson has been a Professor of Finance at the Harvard Business School since 1991. He is an expert in valuation, corporate finance, and corporate restructuring. He has written on a broad range of topics, including corporate bankruptcy and debt workouts, tracking stock, equity spin-offs, corporate downsizing, bank mergers, and employee buyouts. His current research focuses on techniques for valuing bankrupt and distressed companies, and on strategies for investing in distressed company securities. In previous research he has investigated the determinants of financial leverage and capital structure in highly leveraged or distressed companies. He has also studied how distressed firms hire, fire, and compensate their senior managers and directors. Gilson's research has been published by leading academic journals, including the Journal of Finance, the Review of Financial Studies, the Journal of Financial Economics, Financial Analysts Journal, Harvard Business Review, and the Journal of Applied Corporate Finance. His research has also been cited in a number of national news and business periodicals, including The Wall Street Journal, The New York Times, Institutional Investor, Business Week, The Economist, and U.S. News and World Report. He has been interviewed about bankruptcy issues by National Public Radio. In 1996 he won the prestigious Graham and Dodd Award for his article "Investing in Distressed Situations: A Market Survey." For each of the last five years he has been named one of the nation's top bankruptcy academics by Turnarounds & Workouts magazine. He is listed in Who's Who in Economics. Recently a book of his case studies on corporate restructuring was published by John-Wiley & Sons, entitled Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups. Gilson has served as a consultant and taught executive programs for a variety of organizations and companies. He has served as an advisor to the Unsecured Creditors Committee in a large Chapter 11 bankruptcy reorganization, and serves as a testifying expert on corporate finance, bankruptcy, and restructuring matters. He serves on the academic advisory board of The Turnaround Management Association. Gilson has taught MBA and executive courses in corporate restructuring, corporate finance, financial analysis, mergers and acquisitions, and investment banking. At Harvard he currently teaches the course Creating Value through Corporate Restructuring in the School's MBA program. He also chairs and/or teaches in a number of senior Executive Education programs at Harvard, including Corporate Restructuring, Mergers & Acquisitions, Finance For Senior Executives, and the Advanced Management Program. Gilson holds a BA in economics from the University of Manitoba, a Master's in Economics from the University of British Columbia, and a Masters of Science and Ph.D. in Finance from the University of Rochester. Prior to joining the Harvard faculty he was a professor of finance at the University of Texas at Austin.
Featured Work
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Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups
A collection of case studies illustrates real-world techniques, implementation, and strategies on corporate restructuring. Over the period 1981-1998, public companies with combined assets of over half a trillion dollars filed for Chapter 11 bankruptcy. Over the same period, over 400 public companies underwent corporate spin-offs, divesting businesses valued at more than $250 billion. Each of these companies, and all of these dollars, were in some way or another involved in corporate restructuring. Gilson's case studies have been used extensively in executive programs and are perfect tools to refer to when faced with real-world corporate restructuring issues.
Publications
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Book
| 2010
Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups
Stuart C. Gilson
A collection of case studies illustrates real-world techniques, implementation, and strategies on corporate restructuring. Over the period 1981-1998, public companies with combined assets of over half a trillion dollars filed for Chapter 11 bankruptcy. Over the same period, over 400 public companies underwent corporate spin-offs, divesting businesses valued at more than $250 billion. Each of these companies, and all of these dollars, were in some way or another involved in corporate restructuring. Gilson's case studies have been used extensively in executive programs and are perfect tools to refer to when faced with real-world corporate restructuring issues.
Keywords: Restructuring;
Insolvency and Bankruptcy;
Management Analysis, Tools, and Techniques;
Public Ownership;
Value Creation;
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Book
| 2001
Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups
Stuart C. Gilson
Keywords: Value;
Insolvency and Bankruptcy;
Acquisition;
Restructuring;
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Article
| Journal of Applied Corporate Finance
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Coming Through in a Crisis: How Chapter 11 and the Debt Restructuring Industry Are Helping to Revive the U.S. Economy
Stuart C. Gilson
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Article
| Strategic Management Journal
| Forthcoming
Do Analysts Add Value When They Most Can? Evidence from Corporate Spinoffs
Emilie Feldman, Stuart C. Gilson and Belen Villalonga
This paper investigates how securities analysts help investors understand the value of diversification. By studying the research that analysts produce about companies that have announced corporate spinoffs, we gain unique insights into how analysts portray diversified firms to the investment community. We find that while analysts' research about these companies is associated with improved forecast accuracy, the value of their research about the spun-off subsidiaries is more limited. For both diversified firms and their spun-off subsidiaries, analysts' research is more valuable when information asymmetry between the management of these entities and investors is higher. These findings contribute to the corporate strategy literature by shedding light on the roots of the diversification discount and by showing how analysts' research enables investors to overcome asymmetric information.
Keywords: analysts;
Spin-offs;
diversification discount;
information asymmetry;
corporate strategy;
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Article
| Harvard Business Review
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The Social Cost of Fraud and Bankruptcy
Joseph L. Bower and Stuart C. Gilson
Keywords: Cost;
Society;
Insolvency and Bankruptcy;
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Article
| Journal of Accounting Research
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Analyst Specialization and Conglomerate Stock Breakups
Stuart C. Gilson, Paul M. Healy, Christopher F. Noe and Krishna G. Palepu
Keywords: Stocks;
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Article
| Financial Analysts Journal
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Analysts and Information Gaps: Lessons From the UAL Buyout
S. C. Gilson
Keywords: Information;
Learning;
Leveraged Buyouts;
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Article
| Review of Financial Studies
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Valuation of Bankrupt Firms
S. C. Gilson, E. S. Hotchkiss and R. S. Ruback
This study compares the market value of firms that reorganize in bankruptcy with estimates of value based on management's published cash flow projections. We estimate firm values using models that have been shown in other contexts to generate relatively precise estimates of value. We find that these methods generally yield unbiased estimates of value, but the dispersion of valuation errors is very wide—the sample ratio of estimated value to market value varies from less than 20% to greater than 250%. Cross-sectional analysis indicates that the variation in these errors is related to empirical proxies for claimholders' incentives to overstate or understate the firm's value.
Keywords: Valuation;
Business Ventures;
Insolvency and Bankruptcy;
Citation: Gilson, S. C., E. S. Hotchkiss, and R. S. Ruback. " Valuation of Bankrupt Firms." Review of Financial Studies 13, no. 7 (spring 2000): 43–74. (Abridged version reprinted in The Journal of Corporate Renewal 13, no. 7 (July 2000))
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Article
| Journal of Finance
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Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms
S. C. Gilson
This study provides evidence that transactions costs discourage debt reductions by financially distressed firms when they restructure their debt out of court. As a result, these firms remain highly leveraged and one-in-three subsequently experience financial distress. Transactions costs are significantly smaller, hence leverage falls by more and there is less recurrence of financial distress, when firms recontract in Chapter 11. Chapter 11 therefore gives financially distressed firms more flexibility to choose optimal capital structures.
Keywords: Cost;
Capital Structure;
Decision Choices and Conditions;
Information;
Finance;
Business Ventures;
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Article
| Journal of Financial Economics
|
Perceptions and the Politics of Finance: Junk Bonds and the Regulatory Seizure of First Capital Life
S. C. Gilson, H. DeAngelo and L. DeAngelo
In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large junk bond holdings, and both had experienced 'bank runs.' FCLIC's run followed regulators' televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC's statutory capital — with junk bonds, real estate, and mortgages marked to market — was far from lowest among major insurers with California policyholders. It becomes lowest if junk bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the junk bond market's 21% return in early 1991). Our findings suggest a regulatory bias against junk bonds in the political backlash against the 1980s.
Keywords: Finance;
Bonds;
Governing Rules, Regulations, and Reforms;
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Article
| Security Analysts Journal
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Investing in Distressed Situations: A Market Survey
S. C. Gilson
Keywords: Investment;
Citation: Gilson, S. C. "Investing in Distressed Situations: A Market Survey." Security Analysts Journal (1996).
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Article
| Financial Analysts Journal
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Investing in Distressed Situations: A Market Survey
S. C. Gilson
The risks of investing in distressed companies—a practice popularly known as "vulture" investing—are highly firm specific and idiosyncratic. Investors who are adept at managing these risks, who understand the legal rules that must be followed in corporate bankruptcy, and who are skilled at identifying or creating value in a distressed situation consistently earn the highest returns in this market. Among the key characteristics of those who are successful in this market are: 1. a superior ability to value a firms' assets, 2. a superior negotiating and bargaining skill, 3. an understanding of the risks of investing in distressed situations.
Keywords: Investment;
Markets;
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Article
| Corporate Practice Commentator
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Creditor Control in Financially Distressed Firms: The Empirical Evidence
S. C. Gilson and M. R. Vetsuypens
Keywords: Finance;
Business Ventures;
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Article
| Washington University Law Quarterly
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Creditor Control in Financially Distressed Firms: The Empirical Evidence
S. C. Gilson and M. R. Vetsuypens
Keywords: Finance;
Business Ventures;
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Article
| Journal of Financial Economics
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The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the Run on the Bank Phenomenon
S. C. Gilson, H. DeAngelo and L. DeAngelo
In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in junk bonds. During the junk bond market turmoil of 1989–1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50–60% in 1991–1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the junk bond decline. Seizure of FE's subsidiaries was defensible, although FE would have become solvent within a year, given average junk bond market appreciation.
Keywords: Business Ventures;
Bonds;
Banks and Banking;
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Article
| Journal of Applied Corporate Finance
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Creating Pay for Performance in Troubled Companies
S. C. Gilson and M. R. Vetsuypens
Keywords: Performance;
Business Ventures;
Motivation and Incentives;
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Article
| Journal of Finance
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CEO Compensation in Financially Distressed Firms: An Empirical Analysis
S. C. Gilson and M. R. Vetsuypens
Keywords: Management;
Compensation and Benefits;
Business Ventures;
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Article
| Continental Bank Journal of Applied Corporate Finance
|
Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Management;
Business Ventures;
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Article
| Journal of Financial Economics
|
Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default
S. C. Gilson
In 111 publicly traded firms that either file for bankruptcy or privately restructure their debt between 1979 and 1985, bank lenders frequently become major stockholders or appoint new directors. On average, only 46% of incumbent directors remain when bankruptcy or debt restructuring ends. Directors who resign hold significantly fewer seats on other boards following their departure. Common-stock ownership becomes more concentrated with large blockholders and less with corporate insiders. Few firms are acquired. Collectively, these results suggest that corporate default leads to significant changes in the ownership of firms' residual claims and in the allocation of rights to manage corporate resources.
Keywords: Insolvency and Bankruptcy;
Governance;
Banks and Banking;
Change;
Business Ventures;
Ownership;
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Article
| Journal of Financial Economics
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Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default
S. C. Gilson, J. Kose and L. H. P. Kang
This study investigates the incentives of financially distressed firms to restructure their debt privately rather than through formal bankruptcy. In a sample of 169 financially distressed companies, about half successfully restructure their debt outside of Chapter 11. Firms more likely to restructure their debt privately have more intangible assets, owe more of their debt to banks, and owe fewer lenders. Analysis of stock returns suggests that the market is also able to discriminate ex ante between the two sets of firms, and that stockholders are systematically better off when debt is restructured privately.
Keywords: Theory;
Insolvency and Bankruptcy;
Restructuring;
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Article
| Journal of Financial Economics
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Management Turnover and Financial Distress
S. C. Gilson
Keywords: Management;
Finance;
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Chapter
| A Bankruptcy Law Anthology
| Forthcoming
Management Turnover and Financial Distress
S. C. Gilson
Keywords: Management Succession;
Management Teams;
Financial Condition;
Financial Crisis;
Citation: Gilson, S. C. "Management Turnover and Financial Distress." In A Bankruptcy Law Anthology, edited by Charles Tabb. Chicago: Anderson Publishing Company, forthcoming.
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Chapter
| A Bankruptcy Law Anthology
| Forthcoming
Creditor Control in Financially Distressed Firms: The Empirical Evidence
S. C. Gilson and M. R. Vetsuypens
Keywords: Insolvency and Bankruptcy;
Citation: Gilson, S. C., and M. R. Vetsuypens. "Creditor Control in Financially Distressed Firms: The Empirical Evidence." In A Bankruptcy Law Anthology, edited by Charles Tabb. Chicago: Anderson Publishing Company, forthcoming.
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Chapter
| Empirical Corporate Finance
| 2001
Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Organizational Change and Adaptation;
Ownership;
Governing and Advisory Boards;
Banks and Banking;
Banking Industry;
Citation: Gilson, S. C. "Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default." In Empirical Corporate Finance, edited by Michael J. Brennan. Glos: Edward Elgar Publishing, 2001.
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Chapter
| High Yield Bonds: Market Structure, Valuation, and Portfolio Strategies
| 1999
Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Decision Choices and Conditions;
Business or Company Management;
Citation: Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In High Yield Bonds: Market Structure, Valuation, and Portfolio Strategies, edited by T. M. Barnhill, W. F. Maxwell, and M. R. Shenkman. New York: McGraw-Hill, 1999.
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Chapter
| High Yield Bonds: Market Structure, Valuation, and Portfolio Strategies
| 1999
Investing in Distresses Situations: A Market Survey
S. C. Gilson
Keywords: Investment;
Situation or Environment;
Markets;
Citation: Gilson, S. C. "Investing in Distresses Situations: A Market Survey." In High Yield Bonds: Market Structure, Valuation, and Portfolio Strategies, edited by T. M. Barnhill, W. F. Maxwell, and M. R. Shenkman. New York: McGraw-Hill, 1999.
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Chapter
| The Economics of Executive Compensation
| 1999
CEO Compensation in Financially Distressed Firms: An Empirical Analysis
S. C. Gilson and M. R. Vetsuypens
Keywords: Executive Compensation;
Insolvency and Bankruptcy;
Citation: Gilson, S. C., and M. R. Vetsuypens. "CEO Compensation in Financially Distressed Firms: An Empirical Analysis." In The Economics of Executive Compensation, edited by Kevin Hallock, and Kevin Murphy. U.K.: Edward Elgar Publishing, 1999.
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Chapter
| International and Comparative Corporate Insolvency Law
| 1994
Some Methodological Issues in Cross-country Comparisons of Commercial Bankruptcy Law
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Law;
Cross-Cultural and Cross-Border Issues;
Research;
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Chapter
| Corporate Bankruptcy: Economic and Legal Perspectives
| 1994
Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Decision Choices and Conditions;
Citation: Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In Corporate Bankruptcy: Economic and Legal Perspectives, edited by J. Bhandari. Cambridge University Press, 1994.
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Chapter
| The New High-Yield Bond Market: Investment Opportunities
| 1993
Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Citation: Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In The New High-Yield Bond Market: Investment Opportunities, edited by J. Lederman, and M. Sullivan. Chicago: Probus Publishing Co., 1993.
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Chapter
| The New Corporate Finance: Where Theory Meets Practice
| 1993
Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Decision Choices and Conditions;
Citation: Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In The New Corporate Finance: Where Theory Meets Practice, edited by D. Chew. New York: McGraw-Hill, 1993.
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Chapter
| Studies in Financial Institutions: Commercial Banks
| 1993
Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Restructuring;
Borrowing and Debt;
Citation: Gilson, S. C. "Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default." In Studies in Financial Institutions: Commercial Banks, edited by C. W. Smith, and C. James. New York: McGraw-Hill, 1993.
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Chapter
| Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities
| 1992
Management Turnover and Financial Distress
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Management Succession;
Citation: Gilson, S. C. "Management Turnover and Financial Distress." In Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities, edited by Edward I. Altman. New York: Business One Irwin, 1992.
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Chapter
| Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities
| 1992
Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default
S. C. Gilson
Keywords: Insolvency and Bankruptcy;
Organizational Change and Adaptation;
Ownership;
Governing and Advisory Boards;
Banks and Banking;
Banking Industry;
Citation: Gilson, S. C. "Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default." In Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities, edited by Edward I. Altman. New York: Business One Irwin, 1992.
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Chapter
| Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities
| 1992
Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default
S. C. Gilson, J. Kose and L.H.P. Kang
Keywords: Insolvency and Bankruptcy;
Borrowing and Debt;
Restructuring;
Citation: Gilson, S. C., J. Kose, and L.H.P. Kang. "Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default." In Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities, edited by Edward I. Altman. New York: Business One Irwin, 1992.
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Working Paper
| HBS Working Paper Series
| 2010
When Do Analysts Add Value? Evidence from Corporate Spinoffs
Emilie Rose Feldman, Stuart Gilson and Belen Villalonga
We investigate the information content and forecast accuracy of 1,793 analyst reports written around 62 spinoffs—a setting in which analysts' ability to inform investors is potentially very high. We find that analysts pay little attention to subsidiaries about to be spun off even though these subsidiaries constitute a significant part of the parent company operations. Moreover, while the level of detail in analyst research about parent companies is significantly related to EPS and price forecast accuracy, the same is not true for the subsidiaries. We establish that this "forgotten child" phenomenon is linked to a "neglected parent" effect, whereby inaccuracy in subsidiary earnings forecasts is associated with inaccuracy in parent estimates. We conclude by showing that spinoffs may be a particularly complex setting for analysts to evaluate relative to other forms of corporate restructuring, such as IPOs, mergers, or bankruptcies, providing one potential explanation for our findings.
Keywords: Earnings Management;
Mergers and Acquisitions;
Business Subsidiaries;
Restructuring;
Forecasting and Prediction;
Insolvency and Bankruptcy;
Initial Public Offering;
Price;
Reports;
Research;
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Working Paper
| HBS Working Paper Series
| 1998
Valuation of Bankrupt Firms
Stuart C. Gilson, Edith Hotchkiss and Richard Ruback
Citation: Gilson, Stuart C., Edith Hotchkiss, and Richard Ruback. "Valuation of Bankrupt Firms." Harvard Business School Working Paper, No. 99–064, December 1998.
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Working Paper
| HBS Working Paper Series
| 1998
Corporate Focus and the Benefits from More Specialized Analyst Coverage
Stuart C. Gilson, Paul M. Healy, Christopher F. Noe and Krishna G. Palepu
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Working Paper
| HBS Working Paper Series
| 1997
Junk Bonds, Bank Debt, and Financing Corporate Growth
Stuart C. Gilson and Jerold Warner
Citation: Gilson, Stuart C., and Jerold Warner. "Junk Bonds, Bank Debt, and Financing Corporate Growth." Harvard Business School Working Paper, No. 98–037, November 1997.
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Teaching Note
| HBS Case Collection
|
2012
General Growth Properties and Pershing Square Capital Management (TN)
Arthur I. Segel and Stuart C. Gilson
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Case
| HBS Case Collection
|
2013
(Revised from original 2013 version)
W.R. Grace & Co: Dealing with Asbestos Torts
Stuart C. Gilson and Sarah L. Abbott
A manufacturer of buildng prducts and specialty chemicals, W. R. Grace & Co. filed for Chapter 11 bankruptcy in 2001 in response to a flood of lawsuits alleging that its products contained asbestos, and had caused hundreds of thousands of people to contract asbestos-related diseases such as mesothelioma and lung cancer. Nine years later, Grace is poised to emerge from bankruptcy with a plan of reorganization that provides for the establishment of two special purpose trusts through which all current and future asbestos claims will be channeled, allowing the company to survive as an ongoing business. However, the company and asbestos claimholders' committees materially disagree over the size of the company's liability for asbestos, and have hired experts to value the liability. Grace's expert argues the liability is worth between $83 million and $173 million, while the plaintiff's expert argues the liability could be as high as $6.2 billion.
Keywords: restructuring;
valuation;
capital structure;
crisis management;
bankruptcy reorganization;
business failures;
environmental regulations;
class action lawsuits;
Natural Environment;
Valuation;
Health Disorders;
Capital Structure;
Restructuring;
Lawsuits and Litigation;
Chemicals;
Crisis Management;
Insolvency and Bankruptcy;
Legal Liability;
Construction Industry;
Chemical Industry;
United States;
Citation: Gilson, Stuart C., and Sarah L. Abbott. "W.R. Grace & Co: Dealing with Asbestos Torts." Harvard Business School Case 213-046, February 2013. (Revised from original December 2012 version.)
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Case
| HBS Case Collection
|
2012
(Revised from original 2012 version)
General Growth Properties and Pershing Square Capital Management
Arthur I. Segel, Stuart C. Gilson, Thomas Edward Follett Langer, Zubin Gopal Malkani and John Anthony Mascari
Keywords: real estate;
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Supplement
| HBS Case Collection
|
2011
Countrywide plc (CW)
Stuart C. Gilson and Sarah L. Abbott
One of the world's leading investors in distressed companies, Oaktree Capital Management is contemplating a "loan to own" investment in the debt f Countrywide plc, a financially troubled residential real estate agent based in the U.K. Only sixteen months earlier, Countrywide was acquired by a private equity investor Apollo Management L.P. in a leveraged buyout. Although Countrywide is the largest real estate agent in the U.K., and has a strong portfolio of assets, its economic fortunes have declined suddenly with the widespread collapse of global financial and real estate markets, putting it in danger of defaulting on its debt and having to restructure under a U.K. Scheme of Arrangement.
Keywords: Leveraged Buyouts;
Restructuring;
Economic Slowdown and Stagnation;
Assets;
Borrowing and Debt;
Private Equity;
Insolvency and Bankruptcy;
Investment Portfolio;
Crisis Management;
Strategy;
Valuation;
Real Estate Industry;
United Kingdom;
Citation: Gilson, Stuart C., and Sarah L. Abbott. " Countrywide plc (CW)." Harvard Business School Spreadsheet Supplement 211-714, March 2011.
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Case
| HBS Case Collection
|
2011
Countrywide plc
Stuart C. Gilson and Sarah L. Abbott
One of the world's leading investors in distressed companies, Oaktree Capital Management, is contemplating a "loan to own" investment in the debt of Countrywide plc, a financially troubled residential real estate agent based in the U.K. Only sixteen months earlier, Countrywide was acquired by private equity investor Apollo Management L.P. in a leveraged buyout. Although Countrywide is the largest real estate agent in the U.K., and has a strong portfolio of assets, its economic fortunes have declined suddenly with the widespread collapse of global financial and real estate markets, putting it in danger of defaulting on its debt and having to restructure under a U.K. Scheme of Arrangement.
Keywords: Mergers and Acquisitions;
Restructuring;
Financial Crisis;
Capital Structure;
Insolvency and Bankruptcy;
Financial Management;
Investment;
Real Estate Industry;
United Kingdom;
Citation: Gilson, Stuart C., and Sarah L. Abbott. " Countrywide plc." Harvard Business School Case 211-026, February 2011.
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Supplement
| HBS Case Collection
|
2011
Houghton Mifflin Harcourt (CW)
Stuart C. Gilson and Sarah Abbott
One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and it now overburdened with debt. To regain its competitiveness, the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a "pre-packaged" Chapter 11 bankruptcy.
Keywords: Restructuring;
Decisions;
Economic Slowdown and Stagnation;
Borrowing and Debt;
Insolvency and Bankruptcy;
Profit;
Crisis Management;
Goals and Objectives;
Sales;
Competition;
Publishing Industry;
United States;
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Case
| HBS Case Collection
|
2011
Houghton Mifflin Harcourt
Stuart C. Gilson and Sarah L. Abbott
One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and it now overburdened with debt. To regain its competitiveness. the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a “pre-packaged” Chapter 11 bankruptcy.
Keywords: Restructuring;
Decision Choices and Conditions;
Financial Crisis;
Insolvency and Bankruptcy;
Publishing Industry;
Massachusetts;
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Case
| HBS Case Collection
|
2010
(Revised from original 2009 version)
Groupe Eurotunnel S.A. (A)
Stuart C. Gilson, Vincent Marie Dessain and Sarah Abbott
In the summer of 2006, the chairman and CEO of Eurotunnel Group is faced with the decision whether to file for bankruptcy protection, after having failed to gain creditor approval of an ambitious out-of-court restructuring plan. The company, which has been attempting to restructure its debt and operations for the last ten years, faces a number of daunting challenges. Eurotunnel is jointly listed in the U.K. and France, and its shareholders, who are largely based in France, face the prospect of significant dilution under any restructuring plan. The current chairman and CEO has been with the company for only a year and a half, following a decade of senior management turbulence in which the company has seen nine different CEOs and chairmen. Eurotunnel's capital structure is staggeringly complex, and a large fraction of its debt has come to be held by U.S.-based hedge funds that specialize in investing in distressed companies. Finally, Eurotunnel's business is extremely challenging to value and is faced with significant competition. If the current chairman/CEO decides to file for bankruptcy, he faces the additional choice of whether to file for bankruptcy in the U.K. or in France, which take quite different approaches to restructuring troubled companies.
Keywords: Restructuring;
Capital Structure;
Insolvency and Bankruptcy;
Laws and Statutes;
Risk Management;
Rail Industry;
France;
United Kingdom;
Citation: Gilson, Stuart C., Vincent Marie Dessain, and Sarah Abbott. " Groupe Eurotunnel S.A. (A)." Harvard Business School Case 209-062, March 2010. (Revised from original March 2009 version.)
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Case
| HBS Case Collection
|
2010
(Revised from original 2007 version)
Adelphia Communications Corp.'s Bankruptcy
Stuart C. Gilson and Belen Villalonga
In 2002, a massive accounting fraud and corporate looting scandal involving the founding Rigas family made Adelphia the 11th largest bankruptcy case in history, and the third-after WorldCom and Enron-among those triggered by fraud. Set in 2005, when Adelphia is contemplating several options to emerge from bankruptcy, including a $17.6 billion cash-and-stock offer from Time Warner and Comcast, a $17.1 billion cash-only offer from Cablevision, and a $15 billion cash-only offer from KKR and Providence. The fact that both Comcast and Cablevision are themselves family-controlled and with a large wedge between the family's ownership and control rights further complicates the decision.
Keywords: Family Business;
Restructuring;
Crime and Corruption;
Insolvency and Bankruptcy;
Corporate Governance;
Governance Controls;
Family Ownership;
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Case
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2010
(Revised from original 2009 version)
Lyondell Chemical Company
Stuart C. Gilson and Sarah Abbott
Hit with an industry recession and the global financial crisis of 2008, in January 2009 LyondellBasell Industries AF S.C.A., one of the world's largest internationally diversified chemical companies headquartered in The Netherlands, placed its U.S. operations and a German subsidiary under U.S. Chapter 11 bankruptcy protection. To successfully reorganize as a going concern, the company sought to raise over $8 billion in a super-priority "Debtor-in-Possession (DIP)" loan from a group of 13 financial institutions, including commercial banks, investment banks, hedge funds, and private equity funds. Representing one of the largest DIP loans in history, this financing was considered critical to the company's survival. One unique and controversial feature of the financing was a $3.25 billion “roll-up” facility, under which a number of Lyondell's pre-bankruptcy lenders were allowed to significantly elevate the priority of debts they were already owed (so that they ranked ahead of all other pre-bankruptcy debts owed by the company), provided the lenders advanced new loans to the company to help finance its restructuring. With a costly liquidation as the alternative, various creditor groups objected to the DIP financing package, putting Lyondell's reorganization, and survival as a going concern, at significant risk.
Keywords: Restructuring;
Financial Crisis;
Borrowing and Debt;
Capital Structure;
Insolvency and Bankruptcy;
Financing and Loans;
International Finance;
Crisis Management;
Chemical Industry;
Netherlands;
United States;
Citation: Gilson, Stuart C., and Sarah Abbott. " Lyondell Chemical Company." Harvard Business School Case 210-001, February 2010. (Revised from original December 2009 version.)
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Case
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2009
(Revised from original 2001 version)
Buenos Aires Embotelladora S.A. (BAESA): A South American Restructuring
Stuart C. Gilson and Gustavo A. Herrero
In 1998, BAESA, PepsiCo's largest bottler and distributor outside North America, experienced severe financial difficulty and had to restructure its debt and business operations to avoid bankruptcy or liquidation. Based in Argentina, with operations throughout South America, the company had for years been a spectacular success story and media darling, until it undertook an ill-fated expansion in Brazil. The company's debt was owed to banks and financial institutions in South America, Asia, Europe, and the United States. In addition, the company had $60 million of publicly traded bonds, much of them held by U.S. investors. The restructuring was the largest and most complicated undertaking of its kind ever taken in South America. In addition to negotiating with its bankers and making a public exchange offer for its bonds, the company made a massive common stock rights offering to its shareholders, giving them the opportunity to purchase new stock in the company. It also considered filing a "prepackaged" Chapter 11 bankruptcy in the United States to pressure U.S. bondholders to go along with the plan. The negotiations were greatly complicated by differences in the bankruptcy laws of Argentina, Brazil, and the United States.
Keywords: Restructuring;
Borrowing and Debt;
Insolvency and Bankruptcy;
Bonds;
Stocks;
Multinational Firms and Management;
Laws and Statutes;
United States;
Argentina;
Brazil;
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Case
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2009
(Revised from original 2009 version)
Delphi Corp. and the Credit Derivatives Market (A)
Stuart C. Gilson, Victoria Ivashina and Sarah Abbott
In 2005, Jane Bauer-Martin, a hedge fund manager, is considering what she should do with the fund's large investment in the publicly traded bonds of Delphi Corp., a financially troubled auto parts supplier. Delphi is General Motor's key auto parts supplier, and, like GM, it is burdened with large pension and other retiree liabilities that threaten to push it into bankruptcy. Bauer-Martin is considering using various credit derivatives (credit default swaps, credit-linked notes, credit default swap indices, total return swaps, etc.) to hedge her position in Delphi debt, or to speculate on future Delphi bond prices.
Keywords: Borrowing and Debt;
Insolvency and Bankruptcy;
Credit Derivatives and Swaps;
Bonds;
Financial Management;
Risk Management;
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Case
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2009
(Revised from original 2008 version)
Restructuring at Delphi Corporation (A)
Stuart C. Gilson and Sarah L. Abbott
Delphi Corporation, operating under Chapter 11 bankruptcy protection, has filed a plan of reorganization with the court, under which a consortium of hedge funds led by Appaloosa Management will invest up to $2.6 billion in new equity. Also participating in the plan is General Motors which, as the former parent of Delphi, has agreed to fund a portion of the massive pension and retiree health care liabilities that Delphi incurred when it separated from GM in a prior spin-off. The company has also had to seek significant financial concessions from the United Auto Workers, without which it may not survive as a going concern. Greatly complicating the negotiations is the significant uncertainty surrounding the value of Delphi's business and the complexity of its capital structure.
Keywords: Restructuring;
Capital Structure;
Private Equity;
Insolvency and Bankruptcy;
Investment Funds;
Labor and Management Relations;
Auto Industry;
Service Industry;
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Case
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2009
(Revised from original 2008 version)
Kmart and ESL Investments (A)
Stuart C. Gilson and Sarah Abbott
A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The Chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.
Keywords: Restructuring;
Capital Structure;
Insolvency and Bankruptcy;
Investment;
Investment Activism;
Valuation;
Financial Services Industry;
Retail Industry;
United States;
Citation: Gilson, Stuart C., and Sarah Abbott. " Kmart and ESL Investments (A)." Harvard Business School Case 209-044, May 2009. (Revised from original August 2008 version.)
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Supplement
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2009
(Revised from original 2008 version)
Kmart and ESL Investments (B): The Sears Merger
Stuart C. Gilson and Sarah Abbott
Supplement to 209-044
Keywords: Investment;
Mergers and Acquisitions;
Retail Industry;
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Teaching Note
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2009
(Revised from original 2009 version)
Adelphia Communications Corp.'s Bankruptcy (TN)
Stuart C. Gilson and Belen Villalonga
Teaching Note for [208071].
Keywords: Insolvency and Bankruptcy;
Communications Industry;
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Background Note
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2009
Note on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)
Stuart C. Gilson
In 2005, new legislation was passed by the U.S. Congress and signed into law by the President that introduced a number of major amendments to U.S. bankruptcy law, affecting both business and consumer bankruptcies. This legislation, called the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), became effective on October 17, 2005. This note summarizes key provisions of the new law that affect business bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Code, contrasting these provisions with corresponding provisions in the old law.
Keywords: Government Legislation;
Restructuring;
Personal Finance;
Laws and Statutes;
Insolvency and Bankruptcy;
Corporate Finance;
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Supplement
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2009
Groupe Eurotunnel S.A. (B): Restructuring Under the Procedure de Sauvegarde
Stuart C. Gilson, Vincent Marie Dessain and Sarah Abbott
In mid-2007 the chairman and CEO of Eurotunnel Group, having elected to file for bankruptcy under a newly-enacted French insolvency law, awaits the outcome of a vote by creditors and shareholders. At least 50% of the shareholders must approve the plan, however they face significant dilution of their ownership interests in Eurotunnel. If the vote fails to pass, the possibility that the company may have to be liquidated becomes increasingly likely.
Keywords: Restructuring;
Capital Structure;
Insolvency and Bankruptcy;
Law;
Valuation;
Assets;
Investment Funds;
Voting;
Business and Shareholder Relations;
Ownership;
Outcome or Result;
France;
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Supplement
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2008
Adelphia Communications Corp.'s Bankruptcy (CW)
Stuart C. Gilson and Belen Villalonga
Keywords: Insolvency and Bankruptcy;
Communication;
Communications Industry;
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Supplement
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2007
Continental Airlines - 1992 (Abridged) (CW)
Stuart C. Gilson
Keywords: Air Transportation;
Air Transportation Industry;
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Case
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2007
(Revised from original 1993 version)
Continental Airlines--1992 (Abridged)
Stuart C. Gilson
The CEO is preparing a recommendation to the board regarding several potential outside investments in the company, which is currently operating in bankruptcy. In making his decision, the CEO has to consider various financial and strategic factors, including possible synergy benefits and support for the company's huge planned expenditures on new aircraft. To assess the relative merits of the competing investment proposals, it is also necessary to value the company's assets and prescribe a new capital structure for the company after it leaves Chapter 11. Tax factors are extremely important in the analysis. The final decision must be acceptable to the company's creditors and be compatible with allowed U.S. bankruptcy practices.
Keywords: Capital Structure;
Cash Flow;
Cost of Capital;
Insolvency and Bankruptcy;
Investment;
Taxation;
Risk and Uncertainty;
Valuation;
Aerospace Industry;
United States;
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Case
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2007
(Revised from original 2005 version)
Flagstar Companies, Inc. (Abridged)
Stuart C. Gilson
A large restaurant chain undergoes a leveraged buyout and subsequent recapitalization. Financial and operating problems at the company force it to consider various restructuring options, including a prepackaged Chapter 11 exchange offer to its public bondholders. Two investment bankers hired by senior and junior creditors present competing company valuations to the bankruptcy court that differ by $700 million.
Keywords: Leveraged Buyouts;
Restructuring;
Capital;
Insolvency and Bankruptcy;
Debt Securities;
Competition;
Valuation;
Financial Services Industry;
United States;
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Case
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2005
(Revised from original 2001 version)
E.I. du Pont de Nemours and Company: The Conoco Split-off (A)
Stuart C. Gilson and Perry Fagan
After taking 30% of its Conoco oil and gas subsidiary public in the largest domestic initial public offering (IPO) in U.S. history, management of E.I. du Pont de Nemours and Co. (DuPont) is considering divesting its remaining interest in Conoco. This goal is to be accomplished through a relatively uncommon transaction called a corporate "split-off," under which DuPont's shareholders will be given the option to exchange their shares in DuPont for shares in Conoco (but, in contrast to a more conventional "spin-off," they are not obligated to exchange their shares). Management's objective in restructuring is to move DuPont away from its traditional energy and chemical business toward the life sciences (agriculture, biotechnology, and pharmaceuticals).
Keywords: Business Conglomerates;
Business Subsidiaries;
Restructuring;
Non-Renewable Energy;
Chemicals;
Assets;
Initial Public Offering;
Business and Shareholder Relations;
Diversification;
Value;
Chemical Industry;
United States;
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Case
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2005
Arch Wireless, Inc.
Stuart C. Gilson and Perry Fagan
The largest wireless paging company in the United States has to restructure its debt in response to the collapse of its market. The restructuring faces formidable challenges. Valuing the company is extremely difficult because Arch's public competitors are also severely troubled and the industry's future is highly uncertain. In addition, the company has an extremely complicated parent-subsidiary holding company structure.
Keywords: Restructuring;
Borrowing and Debt;
Insolvency and Bankruptcy;
Organizational Structure;
Valuation;
Citation: Gilson, Stuart C., and Perry Fagan. " Arch Wireless, Inc." Harvard Business School Case 205-024, January 2005.
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Case
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2004
(Revised from original 1998 version)
FAG Kugelfischer-A German Restructuring
Stuart C. Gilson
A large German manufacturer of ball bearings and precision machinery experiences severe financial difficulty brought on by poor management practices, an ill-conceived acquisition of a former East German ball-bearings company, and an industry recession. The company hires a German professional turnaround manager who in past turnarounds of German firms has engaged in "U.S.-style" corporate downsizing practices including massive layoffs and asset sales.
Keywords: Accounting;
Acquisition;
Restructuring;
Economic Slowdown and Stagnation;
Machinery and Machining;
Policy;
Resignation and Termination;
Management Practices and Processes;
Performance Evaluation;
Business and Shareholder Relations;
Business and Stakeholder Relations;
Europe;
Germany;
United States;
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Teaching Note
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2004
Seagate Technology Buyout (TN)
Stuart C. Gilson
Teaching Note to (9-201-063).
Keywords: Leveraged Buyouts;
Negotiation Deal;
Negotiation Participants;
Equity;
Value;
Volatility;
Assets;
Capital;
Computer Industry;
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Case
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2003
(Revised from original 2002 version)
Finova Group, Inc. (A), The
Stuart C. Gilson and Perry Fagan
Finova Group, a $14 billion commercial finance company, filed for Chapter 11 in early March 2001, in what was one of the largest U.S. bankruptcy filings of all time and the largest corporate bond default since the Great Depression. While in Chapter 11, Finova became the object of a heated bidding contest. Under the final accepted plan of reorganization, "Berkadia" (partnership of Leucadia National Corp. and value-investor Warren Buffet's Bershire Hathaway) sponsored a massive recapitalization of Finova, providing a secured loan of $6 billion to buy out the unsecured bank and bond creditors. In return, Berkadia received 51% of the reorganized company's common stock and control of the board of directors. No development of new business was planned. A number of entities represented in the case, however, believed that the company might have substantial going concern value and were concerned that Berkadia would acquire the company at an artificially low price. During the bankruptcy, a large fraction of Finova's debt and equity claims were purchased by so-called "vulture investors," who hoped to influence the outcome of the case.
Keywords: Acquisition;
Business Startups;
Borrowing and Debt;
Equity;
Insolvency and Bankruptcy;
Debt Securities;
Price;
Crisis Management;
Bids and Bidding;
Partners and Partnerships;
Strategy;
Valuation;
Financial Services Industry;
United States;
Citation: Gilson, Stuart C., and Perry Fagan. " Finova Group, Inc. (A), The." Harvard Business School Case 202-095, January 2003. (Revised from original January 2002 version.)
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Case
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2003
(Revised from original 2002 version)
Finova Group, Inc. (B),The
Stuart C. Gilson and Perry Fagan
Supplements the (A) case.
Keywords: Financial Services Industry;
United States;
Citation: Gilson, Stuart C., and Perry Fagan. " Finova Group, Inc. (B),The." Harvard Business School Case 202-096, January 2003. (Revised from original January 2002 version.)
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Case
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2002
(Revised from original 2001 version)
Seagate Technology Buyout
Gregor M. Andrade, Stuart C. Gilson and Todd C. Pulvino
In March 2000, a group of private investors and senior managers were negotiating a deal to acquire the disk drive operations of Seagate Technology. The motivating factor for the buyout was the apparently anomalous market value of Seagate's equity: Seagate's equity value was just a fraction of the value of its minority stake in Veritas Software Corp., a software maker. The investor group had to decide how much to offer for the operating assets, as well as how to finance the transaction. Further complicating the analysis was the fact that, unlike in traditional buyout settings, the target company was in a highly cyclical, volatile, and capital--intensive industry.
Keywords: Valuation;
Leveraged Buyouts;
Financial Strategy;
Computer Industry;
Citation: Andrade, Gregor M., Stuart C. Gilson, and Todd C. Pulvino. " Seagate Technology Buyout." Harvard Business School Case 201-063, March 2002. (Revised from original April 2001 version.)
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Case
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2002
(Revised from original 2001 version)
Loewen Group, Inc., The (Abridged)
Stuart C. Gilson
A publicly traded funeral home and cemetery consolidator faces imminent financial distress. The company has grown aggressively through the use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues could complicate the restructuring.
Keywords: International Accounting;
Restructuring;
Borrowing and Debt;
Capital Structure;
Cost of Capital;
Cross-Cultural and Cross-Border Issues;
Crisis Management;
Business and Shareholder Relations;
Business and Stakeholder Relations;
Service Industry;
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Case
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2001
E.I. du Pont de Nemours and Company: The Conoco Split-off (B)
Stuart C. Gilson and Perry Fagan
Supplements the (A) case.
Keywords: Chemical Industry;
United States;
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Case
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2001
E.I. du Pont de Nemours and Company: The Conoco Split-off (C)
Stuart C. Gilson and Perry Fagan
Supplements the (A) case.
Keywords: Chemical Industry;
United States;
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Case
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2001
(Revised from original 2000 version)
Alphatec Electronics Pcl
Stuart C. Gilson, C. Fritz Foley and Perry Fagan
The newly appointed CEO of an important high-technology company in Thailand must lead the company through a complicated debt restructuring. Due to the collapse of the Thai currency, the company's debt burden, like that of most Thai companies, has skyrocketed because it has borrowed heavily in U.S. dollars. The CEO, who is a U.S. citizen, must restructure the company under the recently revised, and largely untested, new Thai bankruptcy law. The new law allows troubled companies to reorganize their businesses following an approach that is similar, but not identical, to that practiced in the United States under Chapter 11 of the Bankruptcy Code.
Citation: Gilson, Stuart C., C. Fritz Foley, and Perry Fagan. " Alphatec Electronics Pcl." Harvard Business School Case 200-004, March 2001. (Revised from original February 2000 version.)
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Background Note
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2000
Valuing Companies in Corporate Restructurings: Technical Note
Stuart C. Gilson
This case provides a technical overview of different valuation techniques for use in valuing companies in corporate restructuring. Techniques covered include adjusted present value, WACC, capital cash flow, and discounted cash flow valuation. Specific numerical examples are provided.
Keywords: Restructuring;
Capital;
Cash Flow;
Interest Rates;
Valuation;
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Case
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2000
(Revised from original 2000 version)
Loewen Group Inc., The
Stuart C. Gilson and Jose Camacho
A publiclytraded funeral home and cemetery consolidator faces imminent financial distress. The company has aggressively grown through use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues potentially complicate the restructuring.
Keywords: International Accounting;
Restructuring;
Capital Structure;
Cost of Capital;
Debt Securities;
Cross-Cultural and Cross-Border Issues;
Crisis Management;
Business and Shareholder Relations;
Business and Stakeholder Relations;
Service Industry;
Citation: Gilson, Stuart C., and Jose Camacho. " Loewen Group Inc., The." Harvard Business School Case 201-062, December 2000. (Revised from original November 2000 version.)
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Case
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1999
(Revised from original 1998 version)
Flagstar Companies, Inc.
Stuart C. Gilson and Jeremy Cott
A large restaurant chain undergoes a leveraged buyout and subsequent recapitalization. Financial and operating problems at the company force it to consider various restructuring options, including a "prepackaged" Chapter 11 exchange offer to its public bondholders. A rewritten version of two earlier cases.
Keywords: Leveraged Buyouts;
Restructuring;
Capital;
Insolvency and Bankruptcy;
Debt Securities;
Financial Services Industry;
United States;
Citation: Gilson, Stuart C., and Jeremy Cott. " Flagstar Companies, Inc." Harvard Business School Case 299-038, May 1999. (Revised from original December 1998 version.)
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Teaching Note
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1998
FAG Kugelfischer- A German Restructuring (TN)
Stuart C. Gilson
Teaching Note for (9-298-046).
Keywords: Germany;
United States;
Europe;
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Teaching Note
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1998
Chase Manhattan Corporation: The Making of America's Largest Bank (TN)
Stuart C. Gilson
Teaching Note for (9-298-016).
Keywords: Banking Industry;
United States;
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Teaching Note
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1998
UAL Corporation (TN)
Stuart C. Gilson
Teaching Note for (9-295-130).
Keywords: United States;
Citation: Gilson, Stuart C. " UAL Corporation (TN)." Harvard Business School Teaching Note 298-126, April 1998.
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Case
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1998
(Revised from original 1997 version)
Chase Manhattan Corporation: The Making of America's Largest Bank
Stuart C. Gilson and Cedric Escalle
Chase Bank and Chemical Bank intend to merge, producing the largest commercial bank in the United States, the fourth largest in the world. Projected financial benefits under the merger reflect significant planned reduction in operating costs, including 17,000 employee layoffs. Management also expects the merger to produce significant revenue increases as a result of increased economies of scale and scope, and other benefits of size and market leadership. The task of valuing the merger gains, negotiating an acceptable merger price, and implementing the post-merger restructuring is extremely complex.
Keywords: Commercial Banking;
Profit;
Corporate Strategy;
Value Creation;
Restructuring;
Negotiation;
Mergers and Acquisitions;
Risk and Uncertainty;
Resignation and Termination;
Revenue;
Banking Industry;
United States;
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Teaching Note
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1997
Donald Salter Communications, Inc. (TN)
Stuart C. Gilson
Teaching Note for (9-295-114).
Keywords: Journalism and News Industry;
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Teaching Note
| HBS Case Collection
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1997
Scott Paper Company (TN)
Stuart C. Gilson
Teaching Note for (9-296-048).
Keywords: Pulp and Paper Industry;
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Teaching Note
| HBS Case Collection
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1997
Navistar International (TN)
Stuart C. Gilson
Teaching Note for (9-295-030).
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Teaching Note
| HBS Case Collection
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1997
USX Corporation (TN)
Stuart C. Gilson
Teaching Note for (9-296-050).
Citation: Gilson, Stuart C. " USX Corporation (TN)." Harvard Business School Teaching Note 298-085, December 1997.
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Case
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1997
(Revised from original 1996 version)
Scott Paper Company
Stuart C. Gilson and Jeremy Cott
A professional turnaround manager attempts to implement a massive global downsizing program at the world's largest producer of consumer tissue products. The plan involves laying off almost one third of the company's 34,000 hourly and salaried employees and dramatically changing the company's business focus through massive asset sales-all in less than a year.
Keywords: Assets;
Global Strategy;
Resignation and Termination;
Goals and Objectives;
Business and Stakeholder Relations;
Sales;
Value Creation;
Pulp and Paper Industry;
Citation: Gilson, Stuart C., and Jeremy Cott. " Scott Paper Company." Harvard Business School Case 296-048, September 1997. (Revised from original January 1996 version.)
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Case
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1997
Transportation Displays, Incorporated (D): Exiting from a Successful Restructuring
Stuart C. Gilson, Vincent Hemmer, Eric Rahe, David Shorrock and Stephen Voorhis
Following a successful corporate turnaround and, more recently, a leveraged recapitalization, management of a highly profitable, fast--growing outdoor advertising company must consider alternative ways to harvest cash flow from the company without jeopardizing the turnaround or incurring significant tax liabilities.
Keywords: Restructuring;
Capital;
Cash Flow;
Profit;
Taxation;
Private Ownership;
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Teaching Note
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1996
First Capital Holdings Corp. (TN)
Stuart C. Gilson
Teaching Note for (9-296-032).
Keywords: Insurance Industry;
California;
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Case
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1996
First Capital Holdings Corp.
Stuart C. Gilson, Harry DeAngelo and Linda DeAngelo
The manager of a money-management firm considers whether to invest in the securities of a large, financially troubled, California-based life insurance holding company that holds 40% of its assets in high-yield junk bonds. Over the past year, the value of its portfolio has declined significantly, and it is seeking a large infusion of capital from its largest (28%) shareholder--a New York-based investment bank--that is experiencing financial difficulties of its own. Within the last month, another large California-based insurance company that also invested heavily in junk bonds was seized by regulators following a "run on the bank" by concerned policyholders, and the State Insurance Commissioner has publicly announced his intention to "crack down" on abuses in the insurance industry.
Keywords: Bonds;
Valuation;
Financial Institutions;
Investment Return;
Governing Rules, Regulations, and Reforms;
Fair Value Accounting;
Insurance Industry;
California;
Citation: Gilson, Stuart C., Harry DeAngelo, and Linda DeAngelo. " First Capital Holdings Corp." Harvard Business School Case 296-032, May 1996.
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Case
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1996
USX Corporation
Stuart C. Gilson and Jeremy Cott
A large diversified steel and energy firm is pressured by a corporate raider to spin off its steel business in order to increase its stock price. As an alternative to the spinoff, management proposes replacing the company's common stock with two new classes of "targeted" stock that would represent separate claims against each business segment's cash flows, allowing the stock market to value each business separately (and more accurately).
Keywords: Restructuring;
Stocks;
Valuation;
Financial Institutions;
Cash Flow;
Citation: Gilson, Stuart C., and Jeremy Cott. " USX Corporation." Harvard Business School Case 296-050, February 1996.
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Case
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1996
Transportation Displays Incorporated (C): The Case for a Preemptive Restructuring
Stuart C. Gilson, Joel T. Schwartz, Steve Silver and David Stemerman
A company nears the end of a long multiyear turnaround and now must consider how to "cash out" so its management can realize a financial return on investment. The privately held company has several options, including a leveraged ESOP and a leveraged recapitalization.
Keywords: Business Exit or Shutdown;
Capital;
Employee Stock Ownership Plan;
Private Ownership;
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Case
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1995
(Revised from original 1995 version)
UAL Corporation
Stuart C. Gilson and Jeremy Cott
In the largest attempted employee-buyout in history, a large U.S. commercial airline seeks substantial wage concessions from its employees in return for 53% stake in the airline's commmon stock and guaranteed seats on the board of directors. Management must convince employees, shareholders, Wall Street analysts, and the media that the buyout makes sense from value, operating, and strategic perspectives.
Keywords: Restructuring;
Corporate Governance;
Labor;
Wages;
Management Teams;
Employee Ownership;
Business and Shareholder Relations;
Strategy;
Value;
United States;
Citation: Gilson, Stuart C., and Jeremy Cott. " UAL Corporation." Harvard Business School Case 295-130, April 1995. (Revised from original March 1995 version.)
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Case
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1995
Donald Salter Communications, Inc.
Stuart C. Gilson and Jeremy Cott
A new CEO is hired to manage the turnaround of a family-owned newspaper publisher. In a departure from previous management, he implements a new compensation scheme that explicitly ties executive pay to market-value-based measures of firm performance. Because the company is not publicly traded, payoffs under the executive compensation plan are based on the firm's appraised value. Determining a value for this company (including any value created by the turnaround manager) is a complicated exercise. Additional complications arise because the firm's value also determines potential cash distributions to family members who wish to sell their shares back to the company. Certain family goals may also be inconsistent with the CEO's objective of maximizing the present value of the firm's assets.
Keywords: Family Business;
Transformation;
Asset Management;
Wages;
Balanced Scorecard;
Family Ownership;
Motivation and Incentives;
Valuation;
Journalism and News Industry;
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Case
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1994
Navistar International
Stuart C. Gilson and Jeremy Cott
As a consequence of laying off half its workforce in a massive downsizing program, the company--a large manufacturer of medium and heavy trucks--struggles with a huge ($2.6 billion) liability for retiree medical costs. Although the company has promised its retirees (and their families) full lifetime medical coverage, it must negotiate a substantial reduction in these benefits to avoid bankruptcy.
Keywords: Negotiation Process;
Wages;
Labor Unions;
Legal Liability;
Insolvency and Bankruptcy;
Restructuring;
Citation: Gilson, Stuart C., and Jeremy Cott. " Navistar International." Harvard Business School Case 295-030, November 1994.
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Case
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1994
(Revised from original 1994 version)
First Executive Corporation
Stuart C. Gilson, Harry DeAngelo and Linda DeAngelo
Citation: Gilson, Stuart C., Harry DeAngelo, and Linda DeAngelo. " First Executive Corporation." Harvard Business School Case 294-105, July 1994. (Revised from original March 1994 version.)
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Background Note
| HBS Case Collection
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1994
(Revised from original 1993 version)
Adjusted Present Value Method for Capital Assets, The
Steven R. Fenster and Stuart C. Gilson
This case provides an explanation of the adjusted present value method for valuing capital assets. The authors believe this approach is generally simple and better for the complicated and changing capital structure found in restructuring.
Keywords: Value;
Capital;
Assets;
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Teaching Note
| HBS Case Collection
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1994
Continental Airlines--1992 & Continental Airlines--1992 (Abridged) (TN)
Stuart C. Gilson
Teaching Note for (9-293-132) and (9-294-058).
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Teaching Note
| HBS Case Collection
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1994
Humana, Inc.--Managing in a Changing Industry (TN)
Stuart C. Gilson
Teaching Note for (9-294-062).
Keywords: Health Industry;
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Case
| HBS Case Collection
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1994
Humana, Inc.: Managing in a Changing Industry
Stuart C. Gilson
Intensifying competition and change in the U.S. health care industry force a large integrated health-care provider to reassess its strategy of operating both hospitals and health insurance plans (HMOs). In an attempt to increase its stock price and operating performance, the company considers a number of alternative restructuring strategies for separating the two businesses, including a corporate spinoff.
Keywords: Business Strategy;
Restructuring;
Change Management;
Financial Management;
Health Industry;
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Case
| HBS Case Collection
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1994
National Convenience Stores, Inc.
Steven R. Fenster, Stuart C. Gilson and Roy Burstin
National Convenience Stores seeks to emerge from Chapter 11. Central to the nature of the reorganization plan is the company's determining enterprise value. The various constituencies (secured debt, unsecured debt, etc.) will seek to find an enterprise value that coincides with their interest. The case provides detailed projection data to permit full utilization of the relevant techniques.
Keywords: Capital Structure;
Valuation;
Restructuring;
Strategic Planning;
Borrowing and Debt;
Food and Beverage Industry;
Texas;
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Case
| HBS Case Collection
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1993
Continental Airlines--1992
Stuart C. Gilson
Keywords: Air Transportation Industry;
Research Summary
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Research Summary
Corporate Restructuring and Business Insolvency: Economic Impact and Best Practices
by
Stuart C. Gilson
Stuart C. Gilson is studying how severe financial distress impacts corporate policies and economic resource allocation. He is also studying how managers can best respond to financial distress in order to preserve and grow value. He is undertaking this research through a combination of field research and large-sample analysis. Much of his work focuses on the role of corporate bankruptcy law in the resolution of financial distress. His past research in this area has considered how management tenure and corporate governance are affected in firms that reorganize in Chapter 11. He has also studied what factors help or hinder the restructuring process and the likelihood of a successful reorganization. For example, he has shown that negotiations in Chapter 11 often break down because competing classes of claimholders come to the negotiations with widely divergent (and deliberately biased) estimates of what the firm is worth. In one ongoing project, he is studying how bankruptcy laws differ across a large sample of countries, to determine how (or whether) the characteristics of a country's bankruptcy laws affect managers' willingness to take risks. In another project, he is studying how efficiently priced are the debt and equity claims of firms in Chapter 11, in an attempt to understand how active trading in these claims (which has increased dramatically in recent years) affects the resolution of financial distress. Finally, he is studying bankrupt firms' increasing use of asset sales (through so-called "Section 363" transactions) to restructure their balance sheets (as opposed to traditional consenual reorganizations under Chapter 11 of the U.S. Bankruptcy Code).
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Research Summary
Role of Information Intermediaries in Financial Markets:: How do Financial Analysts and the News Media Affect Firm Value?
by
Stuart C. Gilson
Stuart C. Gilson is studying how information generated by financial analysts and the news media impacts corporate policies and economic resource allocation. He is also interested in understanding how managers can more effectively interact with such information intermediaries to increase their firms' market value. He is undertaking this research through a combination of field research and large-sample analysis. Much of this work examines the role of analysts and the media in the context of corporate restructuring, where firms can be especially difficult to value, and the impact of information intermediaries particularly great. His previous work in this area includes clinical studies of two controversial (but financially solvent) insurance companies whose large holdings of 'junk bonds' attracted biased and unfavorable media coverage, that ultimately drove both companies into bankruptcy. In another clinical study, he showed how biased and inaccurate coverage by financial analysts and the news media greatly complicated the efforts of United Air Lines to drastically cut its labor costs by giving employees company stock. In a large sample study, he found that firms that broke themselves apart through corporate spin-offs atracted wider (and higher quality) analyst coverage. In current on-going work, Gilson is studying a large sample of public companies to determine how newspapers report on corporate earnings announcements, and whether the accuracy and depth of such reporting can be related to certain identifiable characteristics of both the companies and the newspapers that cover them. In another study, he is evaluating the quality and content of the valuation analysis that financial analysts perform on companies that are about to break themselves apart through equity spin-offs.
Awards & Honors
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Stuart C. Gilson: Winner of the 2012 Distinguished Paper Award from the Business Policy and Strategy Division of the Academy of Management for his paper with Emilie Feldman and Belén Villalonga, “Do Analysts Add Value When They Most Can? Evidence from Corporate Spinoffs” (Strategic Management Journal).
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Stuart C. Gilson: Selected in 2012 as one of the Top Ten Outstanding Bankruptcy Academics by Turnarounds and Workouts.
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Stuart C. Gilson: Appointed Business Law Advisor to the Business Bankruptcy Committee of the American Bankruptcy Association, 2008–2010.
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Stuart C. Gilson: Nominated for the 1998 Smith Breeden Prize for best paper in the Journal of Finance for “Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms” (1997).
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Stuart C. Gilson: Awarded the John M. Olin Visiting Professor Fellowship, University of Virginia Law School, 1997.
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Stuart C. Gilson: Winner of the 1995 Graham and Dodd Award for Excellence in Financial Writing from the Financial Analysts Journal and the CFA Institute for "Investing in Distressed Situations: A Market Survey" (1995).
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Stuart C. Gilson: Nominated for the 1994 Smith Breeden Prize for best paper in the Journal of Finance for "CEO Compensation in Financially Distressed Firms: An Empirical Analysis" (with M. R. Vetsuypens, 1993).
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Stuart C. Gilson: Winner of the 1991 Outstanding Paper in Financial Management at the Financial Management Association Annual Meetings for "CEO Compensation in Financially Distressed Firms: An Empirical Analysis" (with M. R. Vetsuypens).
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