Project Talara — Dissolution vs. Cash Tender
A 1.5-hour Healthcare / Biotech Strategic Alternatives case study with a complete model answer
Modeled After
Leerink Partners
Fairness materials on a cash tender offer for a post-failure biotech: the tender offer set directly against a management dissolution case, an illustrative dissolution sensitivity analysis run as a liquidation waterfall at multiple distribution scenarios, and a precedent transaction analysis denominated in percentage of net cash at close rather than in EV/EBITDA
Structure and exhibit set are modeled after Leerink Partners. The company, the financials and every figure in this case are entirely our own.
The Situation
Talara Therapeutics, Inc. (Nasdaq: TLRA) is a Delaware corporation headquartered in Brenmark, Massachusetts.
Talara Therapeutics, Inc.
- Sector
- Clinical-stage biotechnology, post-failure — no revenue, no marketed product, no active clinical program, and no operating business left to value
- Size
- Geography
- United States; a Delaware corporation headquartered in Brenmark, Massachusetts, listed on Nasdaq
- Ownership
- Situation
The Prompt
You are the financial advisor to the board of directors of Talara Therapeutics, Inc. The Phase III failed, the program is shelved, and the company is a listed pool of cash.
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 90 minutes.
PART 1
Both cash bridges, off one set of cost assumptions
PART 2
Consideration as a percentage of net cash at close
PART 3
The dissolution waterfall
PART 4
Illustrative dissolution sensitivity
PART 5
The two routes in one unit, and the break-evens
PART 6
The precedent screen and the contingent value right
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
- 02
- 03
- 04
- 05
- 06
- 07
- 08
- 09
- 10
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Net cash at close as a denominator
When there are no earnings there is no multiple, and the ratio that replaces it is consideration as a percentage of net cash at close. It is the direct analogue of a transaction multiple: it says what a buyer paid for a dollar of somebody else's cash. Every price in a shell transaction — the offer, the precedents, the ladder a negotiator works off — is quoted that way.
A net cash bridge, and the mid-period interest convention
Net cash at close is the balance sheet less the burn, the severance, the close-out costs and the transaction expenses between here and closing, less the liabilities that survive, plus the interest the portfolio earns on the way. Interest is earned on the average of the opening balance and the balance before interest, which keeps the calculation non-circular; computing it on the closing balance requires iteration, and a shell model has no business carrying a circular reference.
Dissolution under Delaware law: sections 275, 278, 280, 281 and 282
Dissolution needs a board resolution and a majority of the outstanding shares, which means a proxy and a special meeting. The corporation then continues for three years for winding up only. Claims are provided for either through the court-supervised procedure or through a plan of distribution that provides for claims likely to arise or become known within ten years. And a stockholder that receives a liquidating distribution holds it subject to a statutory clawback capped at the amount distributed to it, which a holder that sold into a tender offer does not.
The contingency reserve is the variance, not a haircut
The reserve is a statutory standard requiring provision for a decade of exposure on a discontinued compound rather than an estimate of expected claims. Its size is a timing decision — money held back is paid later rather than never — and the share of it ultimately paid away is a recovery decision. They are different risks, and the instinct to 'reserve conservatively' conflates them.
Timing, and why undiscounted totals mislead
A tender offer pays everything on one date fixed by the offer. A dissolution pays most of its total within months and the rest years later, and in between the transfer books are closed and there is no market to sell into. Two routes can be ranked one way undiscounted and the other way in present value, and a document that shows only one of the two has answered a question the board did not ask.
When a capital loss is recognized
A tender offer is a sale: the amount realized is fixed at closing and the whole gain or loss is recognized that year. A liquidation is also treated as a sale, but the distributions arrive in a series — each one is applied first against basis, gain is recognized once the distributions exceed basis, and a loss is not recognized until the final liquidating distribution is received. For a shareholder base sitting on a large loss that difference is worth more than the difference in the cash itself, and it appears in neither the offer letter nor the wind-down estimate.
Contingent value rights are contracts, not equity
A holder of a contingent value right is a contract counterparty and not a stockholder: no fiduciary protection, and only the rights written down. The instrument's value is almost entirely a function of its efforts covenant, and Delaware courts read efforts covenants narrowly rather than importing a development obligation through the implied covenant of good faith and fair dealing. An undefined 'commercially reasonable efforts' standard is the weakest form in common use.
Two-step tender offers and DGCL section 251(h)
An offer for any and all shares must stay open at least twenty business days and is subject to the all-holders and best-price requirements. Where the merger agreement provides for it and the acquirer ends the offer holding at least the percentage that would be required to adopt the merger, the back-end merger is effected without a stockholder vote. That is why the minimum condition and the section 251(h) threshold are the same number, and why a lower minimum condition buys a controlling stake and a stranded minority rather than a completed transaction.
Why a self-tender and a special dividend are not the answer
Both come up in every one of these situations. A self-tender leaves the same fixed wind-down cost spread over fewer shares, so the holders who do not tender end up owning a smaller shell with a higher cost per share. And both are tested as distributions rather than sales, which for a company with no earnings and profits means a return of capital that reduces basis — so a holder sitting on a loss recognizes nothing at all, in any year, on a schedule the company controls.
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
- —Consideration as a percentage of net cash at close
- —Illustrative dissolution sensitivity
- —Liquidation and wind-down waterfall
- —Contingent value right structuring
- —Precedents denominated in percentage of net cash
- —Net cash bridge to closing
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 Talara — Dissolution vs. Cash Tender
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no discounted cash flow in a case that discounts cash flows?
Because the two things are not the same exercise. A discounted cash flow values an operating business by forecasting what it will earn; there is no operating business here, and forecasting one would be inventing the answer. What this case discounts is a schedule of payments that is already denominated in cash and already known in amount — the difference between them is timing and certainty, not enterprise value. The rate used is a holder's time preference rather than a cost of capital, and it is sensitized rather than derived, because there is no capital structure to derive it from.
The offer is below net cash. Isn't that automatically a bad deal?
No, and treating it that way is the most common error on this archetype. Every route on the table pays out less than the balance sheet says, because getting the money out costs money: months of burn, severance, close-out costs, a lease to settle and professional fees, in either direction. The market is already pricing that. The stock trades at a substantial discount to the company's own cash, and the discount is the price of not controlling it. The question is how the offer compares to the only alternative that actually exists.
How do I value the contingent value right?
You do not. It is non-transferable, it pays only on a disposition that has not happened, of an asset that failed its registrational trial, on a timetable the buyer controls, and putting a probability-weighted number on it would state exactly the view this case says cannot be stated. Frame it as a break-even instead: under the instrument the holders keep a stated share of what the buyer realizes, and in a dissolution they would keep all of what a liquidating company realizes. The ratio between those two is a number a board can actually have an opinion about, and it takes one line to compute.
How much of the 90 minutes should go on the workbook?
Slightly under half. The template's own cover prints the measured scope and a suggested build order, and the workbook's share of the clock is stated there rather than left to you to work out. The rest goes on reading the three documents and the extract, on the deck and on the memorandum. Three deliverables in 90 minutes means finishing every one of them roughly beats perfecting any one of them, and a package with one beautiful exhibit and two empty ones scores badly.
Should the memorandum lead with the present value comparison?
Think hard before it does. Ask yourself how far apart the two routes actually are on that measure, how much of the gap is assumption rather than fact, and who supplied the assumptions. A recommendation that leads with its weakest evidence invites the board to attack the arithmetic instead of engaging with the decision, and there is usually a stronger ground available in the same file. Saying which ground you are standing on, and why it is not the one that looks most quantitative, is a large part of what separates a strong answer here.
Is a self-tender or a special dividend ever the right answer for a shell?
Rarely, and a board that has not been told why will ask for one, so a good answer prices them rather than ignoring them. Both leave the company listed and still spending, both re-allocate the fixed cost of the wind-down onto whoever stays rather than removing it, and both are tested as distributions rather than sales for tax purposes, which for a company with an accumulated deficit and no earnings and profits means a return of capital that reduces basis and defers any loss indefinitely. State the Delaware surplus test and the issuer tender offer mechanics accurately, then say why the economics do not work.
What does the precedent set look like when there are no earnings?
It is denominated in cash consideration as a percentage of net cash at close, and screened to transactions where the target really was a shell. That last condition is the whole of the difficulty: a target that retained a clinical program, an offer from a holder who already controlled the company, an all-stock reverse merger whose numerator is not cash, and a transaction from a different rate environment all produce a number in the same column, and only the descriptive fields tell you which is which. Running the extract as filed and running it screened do not give the same reading of the offer.
About This Healthcare / Biotech Strategic Alternatives Case Study
Healthcare / Biotech Strategic Alternatives case study for investment banking interviews. 90-minute format covering consideration as a percentage of net cash at close, illustrative dissolution sensitivity, liquidation and wind-down waterfall. 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 Healthcare & Life Sciences. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
90-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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