Ref: IMD-7-2086

Case study

Reference: IMD-7-2086

Order this case study

The Wesfarmers way (B)

Salvatore Cantale

By Professor Salvatore CantaleSalvatore Cantale, Peter Coupe and Amit Mehta

A discussion between two hedge fund managers is used to examine the merits of investing in Wesfarmers, an industrial conglomerate, following a transformative acquisition of a retail business called Coles, in 2007.

Coles had been underperforming and was open to bids from Private Equity firms. It was a classic turnaround story. The case is brought to life as Wesfarmers has announced a demerger of Coles in 2018, hence it enables a comprehensive evaluation of the acquisition. The operation turnaround of Coles has been spectacular and the share price ten years on has also done well.

However, the case stresses the importance of capital discipline in acquisitions and what optically can look like a good result, on closer examination may not really be the case. It also brings into the question of risk versus reward.

The case examines the ways in which the success of major acquisitions can be assessed and the methods through which conglomerates can operate successfully. Study of conglomerates is in response to evidence of trends towards business diversification, as a means of delivering growth objectives.

Learning Objective

With the use of a comprehensive example, the case provides ways in which the success of acquisitions can be judged combining operational, financial and strategic objectives. It assists the student critically evaluate acquisitions and how value is created. It also stresses the importance of having strict disciplines when undertaking acquisitions which are inherently risky. Appreciation of management models for running diversified corporations.

KeywordsAcquisition, Behavioral Finance, Finance, Public Company, Risk Management
SettingsAustralia
Consumer Services
April 2007 to February 2018
TypePublished Sources
Copyright©2019
LanguageEnglish
Related materialTeaching note
Order this case study

Reference: IMD-7-2086

IMD case studies are distributed through case clearing houses. In order to browse the collection and purchase copies please visit the links below.

The Case Centre, UK Office

Cranfield University

Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Fax +44 (0)1234 751125
Email [email protected]

The Case Centre, US office

Babson College

Babson Park, Wellesley MA 02457, USA
Tel +1 781 239 5884
Fax +1 781 239 5885
Email [email protected]

Harvard Business School Publishing

60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]

Asia Pacific Case Center

NUCB Business School

1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]

Copyright information

IMD retains all proprietary interests in its case studies and notes. Without prior written permission, IMD cases and notes may not be reproduced, used, translated, included in books or other publications, distributed in any form or by any means, stored in a database or in other retrieval systems. For additional copyright information related to case studies, please contact Case Services.

Contact

Information Center for additional information on IMD publications

Case study

Reference: IMD-7-2086

Order this case study

More on this case series

The Wesfarmers way (A)

Looking for something specific?

Keep reading

Back to top