Project Elmore — Technology Hardware Strategic Alternatives
A 2.5-hour Technology Hardware / Strategic Alternatives case study with a complete model answer
Modeled After
Goldman Sachs
Special committee strategic alternatives materials laid out as a menu — status quo, leveraged buyout, spin-off, spin-merger and return of capital — each with its own illustrative analysis, an alternatives matrix with a dotted-line legend for standalone-feasible options, three event-study precedent sets carrying announcement price-reaction columns rather than multiples, and explicit disclosure of the advisor's own role in highlighted transactions
Structure and exhibit set are modeled after Goldman Sachs. The company, the financials and every figure in this case are entirely our own.
The Situation
Elmore Systems Corporation (NYSE: ELMR) is an enterprise technology hardware company with two reported operating segments and a captive finance subsidiary.
Elmore Systems Corporation
- Sector
- Enterprise technology hardware — servers, storage and datacenter networking, with a hardware support and managed services attach sold into the installed base, and a captive finance subsidiary that funds customer purchases of the company's own equipment
- Size
- Geography
- United States; headquartered in Sunnyvale, California, with engineering, supply chain, the services delivery organization and the finance subsidiary managed centrally
- Ownership
- Situation
The Prompt
You are the financial advisor to the Board of Elmore Systems Corporation. The Board has directed a confidential review of strategic alternatives on its own initiative.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 150 minutes.
PART 1
The finance subsidiary, and what the market actually pays
PART 2
The two operating cases, and the balance sheet they produce
PART 3
The sum of the parts, and Alternative 1 — the standalone plan
PART 4
Alternative 2 — return of capital
PART 5
Alternatives 3 and 4 — separate, or spin-merge
PART 6
Alternative 5 — sale of the company
PART 7
The menu, the matrix and the recommendation
Attempt It First
Blank modelling template
The answer model with every produced cell cleared — the shell you build your attempt in. Work it in Excel against the clock, then check yourself against the model answer below.
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck, Excel model and memo are in the solution set below.
- 01
Write down what the answer is a list of, before valuing anything
- 02
Split the balance sheet before you strike a single multiple
- 03
Treat the standalone plan as an alternative, not as a foil
- 04
Separate the accretion from the value
- 05
Size the dis-synergy before you size the re-rating
- 06
Find the constraint that actually binds each alternative
- 07
Use the event studies for what they measure, and say so
- 08
Recommend, decline, and state the counter-argument
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Menu-of-options architecture
A board-level exercise that prices every course of action open to a company on one comparable axis and closes in a recommendation. It is not a valuation of one subject and it is not a fairness opinion: the alternatives are mutually exclusive, several are things the company would do to itself, and nothing has been agreed. The discipline the archetype imposes is that a sale, a spin-off, a spin-merger, a recapitalization and a standalone plan all resolve to the same unit on the same date — otherwise the board is being asked to compare a dividend with a multiple with a share price and do the translation in its head.
Present value of a future share price
Rather than discounting cash flows, this construction values an alternative at the date it delivers — a future enterprise value at an applied multiple, plus anything carried at book, less the net debt at that date — divides by the share count, and discounts that price back at the cost of equity, adding the dividends received in the meantime. It is the natural unit for a menu, because it prices TIMING as well as value: an alternative that pays in three years is discounted for three years, and one that pays in six months is not.
Captive finance subsidiary
A wholly owned lender that finances customer purchases of the parent's own product. It earns a spread on a book of receivables funded with non-recourse debt, so it is carried at book equity rather than on an earnings multiple, its debt is not the parent's leverage, and its equity is a use of funds in a buyout rather than a source of leverage. Consolidating it into an enterprise value inflates the multiple; consolidating its debt into leverage understates the parent's capacity. Both errors are invisible unless the convention is stated in both directions.
Services attach and its dis-synergy
In enterprise hardware the support and managed services stream is sold by the salesforce that sells the equipment and renewed off the installed base that equipment creates. It carries a materially higher margin and a recurring revenue profile, which is why it commands a higher multiple — and why separating it destroys some of what makes it valuable. The dis-synergy is the real argument against a separation, and a sum-of-the-parts that ignores it is a measure of a prize rather than of an outcome.
Return-of-capital accretion, and why it is not value
Debt-funded repurchases are accretive to earnings per share whenever the earnings yield on the shares retired exceeds the after-tax cost of the new debt. That is an identity: the multiple is not a yield the company earns, it is a price other people pay. The value of a leveraged self-tender is the interest deduction less the fees, adjusted for what the added leverage does to the cost of equity on the remaining stub — and the premium paid to tendering holders is a transfer from the holders who stay, worth nothing across the register as a whole.
Reverse Morris Trust and the ownership test
A tax-free way to combine a subsidiary with a third party: the parent spins the business to its own shareholders, who then exchange shares with the counterparty. It stays tax-free only if the original shareholders hold more than half of the combined company immediately afterwards, which caps how much the counterparty may contribute and how much cash the spun business may dividend to the parent beforehand. The constraint solves in closed form — at the boundary the two contributed equity values are equal — and it is usually tighter than the commercial negotiation.
Event study, and what a price reaction is evidence of
A precedent set built from announcement-day price reactions rather than from multiples. It answers what the market did on the morning of comparable announcements, which is the right question for a menu because most of the alternatives on one are not changes of control and have no consideration to compare. What it cannot tell you is what anything is worth: if a median reaction implies a price your own financing analysis says cannot be reached, the analysis with arithmetic behind it wins.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck, Excel model and memo, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Menu-of-options architecture
- —Present value of future share price
- —Spin-merger synergy and ownership split
- —Return-of-capital P/E arbitrage accretion
- —Event-study precedent sets by transaction type
- —Financing subsidiary considerations
Answer Deck
Full model answer, banker-formatted
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model, the memo and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Memo (PDF) and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Elmore — Technology Hardware Strategic Alternatives
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is a strategic alternatives case study in an investment banking interview?
It is a board-level exercise rather than a transaction exercise. A company is trading below where its board thinks it should, or an activist has arrived, or both, and the board asks its advisor for every course of action available to it, priced comparably, plus a recommendation. What is graded is the comparison: whether a sale, a spin-off, a recapitalization and a standalone plan all resolve to the same unit on the same date, whether the assumptions behind each are stated rather than buried, and whether the recommendation names its own counter-argument. It is one of the few exercises where the structure of the answer matters as much as the arithmetic inside it, because a board that cannot compare the alternatives cannot use the work at all.
How do you value a company with a captive finance subsidiary?
Separately, and in both directions. The finance subsidiary is a lender: it earns a spread on a book of receivables funded with non-recourse debt matched to those receivables. It is carried at book equity rather than on an earnings multiple, its debt is kept out of the industrial enterprise value, and its equity is added back in every equity bridge. Doing one and not the other either flatters every multiple or loses real value to the shareholder. The practical tell is that a consolidated EV/EBITDA screen on such a company reports a HIGHER multiple than the industrial business actually trades at, because the subsidiary's debt inflates enterprise value while its spread income adds very little to Adjusted EBITDA — so the operating business is usually cheaper than the screen suggests, not dearer.
Why would a precedent set carry price reactions instead of multiples?
Because of the question being asked. A precedent transaction multiple tells you what somebody paid for a comparable business; that is the right evidence when you are pricing a change of control. On a strategic alternatives menu most of the options are not changes of control at all — a spin-off has no consideration, a recapitalization has no buyer — so there is nothing to take a multiple of. What a board wants to know is what the market is likely to do on the morning of the announcement, and that is an announcement-day price reaction. The discipline is to say on the page what an event study is evidence of: it measures reaction, not value, and if a median reaction implies a price your financing analysis says cannot be reached, the financing analysis is the one with arithmetic behind it.
Is earnings-per-share accretion from a buyback the same as creating value?
No. A debt-funded repurchase is accretive whenever the earnings yield on the shares retired — the inverse of the price-to-earnings multiple you pay — exceeds the after-tax cost of the debt that funds it. That is an arithmetic identity and it says nothing about value: the multiple is a price other people pay, not a yield the company earns. What actually creates value is the interest deduction, less the fees, less whatever the added leverage does to the cost of equity on the shares that remain. And the premium paid in a tender is a transfer: the holders who stay pay it to the holders who go, so across the register as a whole it is worth nothing.
How should you allocate 150 minutes across a strategic alternatives case?
Roughly: fifteen to twenty minutes reading and screening, an hour and a half in the workbook, and the balance on the presentation and the memorandum. The reading matters more than it looks, because two of the raw sets arrive unscreened and both screens are graded. Inside the workbook, build the shared pieces first — the balance sheet split, the two operating cases and the rollforward every alternative deducts a net debt figure from — because five alternatives built on one base is an hour's work and five alternatives built five times is not finishable. Finish every alternative roughly before perfecting any of them: a menu with four priced options and one left unpriced has not answered the question, however good the four are.
Does choosing between these alternatives change the standard the board is judged by?
Yes, and say so in the text rather than in a footnote. Running the plan, returning capital and separating a segment are ordinary business decisions reviewed under the business judgment rule. Deciding to pursue a sale of control is not: once a board goes down that road its conduct is measured against enhanced scrutiny and an obligation to seek the best value reasonably available. A spin-merger adds a different constraint again, and it is a tax one rather than a fiduciary one — the transaction is tax-free only above an ownership threshold, and that test can be tighter than anything in the commercial negotiation. None of this is a reason to prefer or avoid a particular alternative. It is a reason to make the choice with the standard in mind and to document it.
About This Technology Hardware / Strategic Alternatives Case Study
Technology Hardware / Strategic Alternatives case study for investment banking interviews. 150-minute format covering menu-of-options architecture, present value of future share price, spin-merger synergy and ownership split. Includes the full prompt, a model answer deck, a tied-out Excel model, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Technology. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
150-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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