gsassetmanagementnotetoprofessor.docVIP

GS ASSET MANAGEMENT: NOTE TO PROFESSOR Introduction The Asian financial crisis caused tremendous panic in the world financial markets. However, after the dust settled, or in some cases even before it settled certain investors were “back” looking for value – fundamentally sound companies that were undervalued as a result of the crisis. As the crisis-ridden countries eased their regulations on foreign ownership, several global banks, MNCs and even smaller companies began to descend on Asia in search of value. The GS Asset Management (GSAM) case is an example of one such situation. Among others, the cases learning objectives include the following: Estimating discount rates for companies in emerging market countries in times of crisis, specifically Thailand Making projections and doing a company valuation in a time of financial crisis Distinguishing between a good company that is selling cheaply because of the crisis or a fundamentally unsound and potentially bankrupt company Identifying what kind of risks should an investor consider when he gets involved in a emerging market project especially during a financial crisis Providing background on the Asian Financial Crisis and its implications Synopsis The case is set in January 1998, when a European bank was looking to expand its retail asset management business in Asia by buying a stake in local companies. Their search has lead them to GS Asset Management (GSAM) which was the fourth largest mutual fund company in Thailand in terms of assets under management. As a result of the stock market crash, the company was affected badly. Several of the bond funds it managed were liquidated and the business was finding it difficult to fund itself. A foreign buyer with a commitment to sustain and grow the business could tide the company through the crisis. The case presents a background on the Asian financial crisis, the Thai economy, the company to be purchased, the European bank and the risk/issues it fac