Project Thornbury — Activist Campaign Response
A 1.5-hour Shareholder Advisory / Activist Defense case study with a complete model answer
Modeled After
Perella Weinberg Partners
Special committee strategic alternatives materials for a controlled specialty retailer: growth-versus-EV/Revenue regression, illustrative share-price trajectory as the standalone comparator, go-shop efficacy statistics, and institutional cost-basis analysis
Structure and exhibit set are modeled after Perella Weinberg Partners. The company, the financials and every figure in this case are entirely our own.
The Situation
Thornbury Consumer Brands, Inc. (NYSE: THBY) sells branded household care and specialty nutrition products through retail grocery, mass, club and direct channels.
Thornbury Consumer Brands, Inc.
- Sector
- Consumer packaged goods — branded household care products, plus a faster-growing specialty nutrition and supplements business
- Size
- Geography
- United States; sold through retail grocery, mass, club and direct channels
- Ownership
- Situation
The Prompt
You are an analyst on the team advising the board of directors of Thornbury Consumer Brands, Inc.
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
Grade the six claims before you answer any of them
PART 2
Reproduce their sum-of-the-parts as published, then rebuild it
PART 3
Test the same claim a second way, with a regression
PART 4
Screen the universe, then check what the screening actually moved
PART 5
Put the standalone plan on the board as a comparator
PART 6
Map the register and count the vote
PART 7
Answer the sixth ask with the published record on go-shops
PART 8
Price settling against fighting, and say what the board commits to instead
PART 9
The legal frame, the recommendation, and the sentence that cuts against it
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and memo are in the solution set below.
- 01
Get the legal frame right before you write a single page
- 02
Reproduce their number before you correct it
- 03
Screen the universe, then check the right statistic
- 04
Run the two routes to the answer and let them check each other
- 05
Price the plan, including at the rate it has actually run at
- 06
Count the vote, then decide
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
A proxy contest is not a sale of control
The single most likely error in the case. The enhanced duty associated with a sale of control attaches when a board decides to sell the company, to break it up, or to enter a transaction that puts control in the hands of a single buyer. An activist filing a Schedule 13D, publishing a break-up thesis and nominating directors does none of those things — nobody has offered to acquire anything, and the board has decided nothing. A board that answers by making its own case to stockholders is acting inside the ordinary standard of review. Getting this backwards contaminates the whole package: it turns a board with a real choice into a board that believes it is obliged to run a process nobody authorized, and it recommends defensive measures that have no application here.
Acts aimed at the vote draw a different, much harder test
The one frame that does bite. Where a board acts for the primary purpose of interfering with the stockholder franchise — issuing stock to a friendly holder, moving or delaying the annual meeting, expanding the board to dilute the contested seats — the board carries the burden of showing a compelling justification, a standard boards rarely meet. The calendar is a legal fact as well as a scheduling one: an advance-notice bylaw with a standard thirty-day reopening provision means that moving the meeting for apparently innocent reasons reopens the nomination window and hands the dissident a second chance. Confirm on the page that nothing recommended does any of this, because a reader who cannot tell will assume the worst.
Corporate cost does not disappear when a segment leaves
The largest single correction in most break-up theses, and the one activists most often omit. Corporate and unallocated cost is reported before segment earnings, so a sum-of-the-parts that values each segment on its pre-corporate earnings and then assumes the corporate line goes to zero is claiming a saving that does not exist. Three things happen instead. Some of the cost does move with the departing segment. Most of it is retained by the business that remains, which does not get smaller because a segment left. And the separated business has to build the functions the parent used to supply — a board, a listing, an audit, treasury and tax, quality and regulatory, an enterprise resource planning instance. The net of those three is almost always a cost, not a saving, and it is a cost of the transaction being proposed rather than an opinion about it.
Dis-synergies and the cash cost of separating
The other two lines a break-up page tends not to carry. Two businesses under one roof buy inputs together and ship to the same customers together; separated, each loses some of that scale, and the loss is a permanent reduction in earnings rather than a one-time charge. Separately, separating costs cash: systems separation, the private letter ruling and tax opinion process, legal and advisory fees, rebranding, and running two enterprise resource planning instances where there was one. That cash is spent whether or not the separation delivers, so it comes off enterprise value at full value rather than being discounted or capitalized. Both belong on the same page as the multiple correction, and both should come from a function-by-function review rather than from a percentage rule of thumb.
Decomposing a discount into margin and structure
The reason to run the regression twice. A revenue multiple contains the margin — EV to revenue is arithmetically EV to EBITDA times the EBITDA margin — while an earnings multiple holds it constant. So a company that trades below its fitted revenue multiple and at its fitted earnings multiple is not carrying a structural discount at all; it is carrying a lower margin, and a lower margin is what a lower margin is called. Running only the revenue regression produces a large-looking discount and hands the activist an argument. Running both and taking the difference tells the board how much of the gap is the thing a separation could conceivably fix, which is usually a small fraction of what the thesis claims.
A regression on twelve points is a way of organizing a scatter plot
Stating the limits of the instrument is part of using it properly. A two-variable fit on a dozen observations cannot separate growth from margin, category mix, leverage and idiosyncratic news, and its R-squared should be reported rather than buried. The residual is the right output, but it should be expressed in standard deviations of the fit as well as in dollars, because a residual that is a fraction of a standard deviation is not evidence of anything. And no fitted value is a target price. A candidate who presents a fitted multiple as what the shares should be worth has converted a descriptive statistic into a valuation, which is the move the exhibit exists to refuse.
Achievement measured on the growth, not on the target
The difference between a plan track record that means something and one that does not. If a plan asks for a step-up in Adjusted EBITDA from a base the company already earns, then measuring delivery against the absolute target flatters the record enormously — almost all of the target is the base, so a company that delivers no growth at all can still report high-nineties achievement. Measure instead against the incremental earnings the plan asked for, from the actual result it was set off. That produces a rate the board recognizes, and it is the rate to apply on the trajectory grid, flowed through free cash flow into the net debt roll so a shortfall slows the deleveraging as well as reducing the earnings.
The register votes on cost basis
The grouping that actually predicts a contested vote is not passive versus active; it is whether the holder is above or below its own cost. A holder sitting on a loss votes for change, and that is an observable rather than a characterization — it is computable from position histories and it is often the largest single block on the register after the index funds. Index managers vote with the proxy adviser at very high rates in both directions, which makes the adviser's recommendation the single variable the whole contest turns on. Build the support arithmetic conditional on that recommendation, both ways, and then be careful with the threshold: a plurality election is decided by votes cast, so the majority-of-votes-cast line has to be converted onto shares outstanding at a realistic turnout before anything is compared to it.
A go-shop is a fee, not a market check
The published record answers the sixth ask without argument, provided the events are counted correctly. An excluded-party designation, a superior proposal and a completed transaction with somebody other than the original buyer are three different things, and quoting the first as though it were the third overstates what a go-shop does by a wide margin. Multiply the completion rate by the median uplift where a topping bid actually emerged and the expectation is a fraction of a percent — against a no-shop termination fee measured in whole percentage points of equity value. The one place a go-shop demonstrably works is where the first buyer is a financial sponsor and a strategic can outbid it, which is a question about who the likely first buyer is rather than about the provision itself.
Conceding is a tactic, not a surrender
Most campaign responses fail by contesting everything. Where a claim is arithmetic — a cost line that has outgrown sales for two years, an acquisition program earning below the cost of capital, a total shareholder return gap measured in thousands of basis points — the board cannot argue with it and should not try. Concede in the board's own words, in the same release as the commitments that answer it, so the commitments read as the board's own conclusions rather than as concessions extracted by a settlement. What that buys is the credibility to contest the one claim that carries the money. A response that disputes the undisputed spends its credibility before it reaches the argument it needs to win.
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 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
- —Activist thesis deconstruction
- —Institutional shareholder summary and cost basis
- —Growth versus EV/Revenue regression
- —Go-shop efficacy statistics
- —Illustrative share-price trajectory
- —Settlement versus fight recommendation
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 memo and the audio walkthrough.
Get StartedDownloads are available to Diamond members
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 Thornbury — Activist Campaign Response
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is an activist defense case study in an investment banking interview?
It is a case where you advise a board that has received a public campaign from an activist stockholder — typically a Schedule 13D filing, a published thesis deck and a slate of director nominations — rather than an acquisition proposal. You produce the board materials: a grading of the activist's claims on the evidence, a rebuild of whatever valuation the thesis rests on, an independent test of the same proposition, a priced comparator for the standalone plan, an analysis of the register and the likely vote, and a recommendation to settle, to fight, or to pre-empt. It sits in shareholder advisory rather than M&A, and it tests judgment about governance, credibility and negotiation at least as heavily as valuation mechanics — which is why it appears in later rounds and take-home exercises rather than first-round screens.
Does Revlon apply when an activist demands a break-up or a sale?
No. The enhanced duty associated with a sale of control attaches when the board decides to sell the company, to break it up, or to enter a transaction that puts control in the hands of a single buyer. A stockholder demanding any of those things decides nothing; the board has not agreed to sell and nobody has offered to buy. A board that rejects the demand and continues with its own plan is making an ordinary business decision reviewed under the business judgment rule. What is reviewed differently is an act whose primary purpose is to interfere with the stockholder vote — moving the meeting, expanding the board, issuing stock to a friendly holder — which requires a compelling justification, a standard boards rarely meet. The analysis in your package is the record showing the board reached its conclusion on an informed basis.
Should a board settle with an activist or fight the proxy contest?
Decide it on the seat count and the calendar rather than on the direct cost, which is usually trivial relative to the decision. Fighting has a probability attached: apply the published base rate for a company with this performance record to the seats actually contested, and compare the expected seats lost against the certain seats a settlement concedes. Then price what each buys. A settlement typically buys a standstill through the following annual meeting, control of the agenda in the meantime and an end to the distraction; a fight buys none of those even if it is won, because a whole board that stands annually is exposed again in twelve months. The honest framing is that a settlement converts an uncertain number of seats into a certain smaller number and buys a year, and the board should make that trade knowing what it is rather than in spite of it.
How do you rebuild an activist's sum-of-the-parts?
Reproduce it first, exactly as published, so the board can see what is being contested. Then correct it in three places and build the bridge so the corrections cannot overlap. First, corporate cost: some of it moves with the departing segment, most is retained by the business that remains, and the separated business has to build functions the parent supplied — the net is a cost, not a saving. Second, dis-synergies: procurement and distribution scale that exists only because the two businesses are under one roof, lost permanently on separation. Third, the multiple: check the segment multiples against the actual observed range of comparable companies, because a multiple above the highest observation in the set is not a judgment, it is an assertion. Finally, deduct the one-time cash cost of separating at full value. Strike the cost corrections at your multiple and the multiple correction at their earnings, or the bridge double-counts the intersection.
Why run a regression of trading multiples against growth?
Because it answers the break-up claim from a completely different direction. A sum-of-the-parts asks what the pieces are worth apart; a regression asks whether the market is discounting the whole in the first place. If the company sits close to the line drawn by companies with the same growth, there is no structural discount for a separation to unlock, and that conclusion does not depend on any multiple you chose. Run it on both a revenue and an earnings basis: the revenue multiple contains the margin and the earnings multiple holds it constant, so the gap between the two residuals is the part of any apparent discount that is simply a lower margin. Then state the limits — the R-squared, the number of observations, and the fact that a fitted value is not a target price.
How much of the shareholder register actually decides a contested election?
Less of it than the register's length suggests, and the deciding variable is usually one recommendation. Index and other passive managers are a large block that votes with the principal proxy adviser at very high rates in both directions, so their support flips almost entirely on that recommendation. Actively managed holders split, and the split that predicts them best is whether they are above or below their own cost basis — a holder sitting on a loss votes for change. Retail votes lightly and follows the adviser at a much lower rate. Build the arithmetic conditional on the adviser's recommendation, both ways, and convert the majority-of-votes-cast threshold onto shares outstanding at a realistic turnout before comparing. What you should hand the board is a probability under each recommendation, not the word 'vulnerable'.
How should you allocate ninety minutes across an activist defense case?
Budget backwards from the recommendation, and finish the thinking before you start drafting. A workable split: twelve minutes reading the campaign deck and the board pack and writing down the legal frame; fourteen screening the sixteen-name extract and running both regressions; sixteen rebuilding the sum-of-the-parts and pricing the standalone plan; eight mapping the register and the vote; twenty-two building the presentation; and eighteen drafting the memorandum. That leaves nothing spare, which is the point. The failure mode is a beautifully built trajectory grid attached to a package that never grades the six claims and never says what the board should do.
About This Shareholder Advisory / Activist Defense Case Study
Shareholder Advisory / Activist Defense case study for investment banking interviews. 90-minute format covering activist thesis deconstruction, institutional shareholder summary and cost basis, growth versus ev/revenue regression. Includes the full prompt, a model answer deck, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Shareholder Advisory & Strategic Defense. 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
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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