Case Study Short Essay Examination Questions

Essay

Case Study Short Essay Examination Questions
Case Study: Sleepless in Philadelphia
Closings can take on a somewhat surreal atmosphere. In one transaction valued at $20 million, the buyer intended to finance the transaction with $10 million in secured bank loans, a $5 million loan from the seller, and $5 million in equity. However, the equity was to be provided by wealthy individual investors (i.e., "angel" investors) in amounts of $100,000 each. The closing took place in Philadelphia around a long conference room table in the law offices of the firm hired by the buyer, with lawyers and business people representing the buyer, the seller, and several banks reviewing the final documents. Throughout the day and late into the evening, wealthy investors (some in chauffeur-driven limousines) and their attorneys would stop by to provide cashiers' checks, mostly in $100,000 amounts, and to sign the appropriate legal documents. The sheer number of people involved created an almost circus-like environment. Because of the lateness of the hour, it was not possible to deposit the checks on the same day. The next morning a briefcase full of cashiers' checks was taken to the local bank.
Discussion Question:
-What do you think are the major challenges faced by the buyer in financing small transactions transaction in this
manner?