Corporate finance, financial management.
The case is suitable for Master's level corporate finance or financial management courses. Sufficient prior theoretical knowledge of corporate finance concepts is required.
Väätsa Agro AS is an Estonian dairy farming company. Although the company had operated successfully in the past, its ownership changed significantly in 2006 leading to changes in the company's capital structure. Starting from 2008 milk prices on global markets decreased and this trend had also affected the company's profits. As a result of these developments the company's financial situation had deteriorated since 2008 and towards the end of 2009 the company had problems in meeting its obligations. On 1 September 2009 its owners hired a consultancy firm represented by Karl Kukk to tackle the company's problems.
Expected learning outcomes
The case should help students to: understand the risks of LBOs; understand the importance of an appropriate capital structure of a firm; evaluate a company's financial situation and compare it with competitors; understand the alternatives facing firms in financial distress; and choose the best course of action for a distressed firm considering the pros and cons of each alternative for each stakeholder group.
Teaching notes are available; please consult your librarian for access.
The author thanks Väätsa Agro AS representatives for their cooperation as well as the students of 2012 “Financial Management Cases” for their patience in testing the case material and providing some interesting insights. The author is also grateful to Kalle Ahi who helped to communicate with the company and provided constructive feedback to the materials prepared.
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