|Donaldson, Lufkin & Jenrette
Case Study Solution
Donaldson, Lufkin & Jenrette, 1995
Assume the role of advisor to institutional investors.
1. Why is Equitable considering selling on interest in DLJ? In
answering this question, account for
Equitable’s perspective, DLJ’s strategic position, and major forces of
turbulence in the industry.
2. What are the relative advantages and disadvantages of (i)
carve-out, (ii) spin-off, (iii) divesture
through cash sale, and (iv) continued complete ownership by
Equitable? Why did Richard Jenrette choose
an equity carve-out DLJ?
3. Prepare to describe the equity underwriting process, and the
particular concerns of an initial public
offering. Who is the “lead manager” in this instance, and what is that
firm’s role. What are the risks?
4. What is your estimate if DLJ’s fair value per share? In answering this question please draw on as many valuation approaches
as you can. Give special attention to the valuation multiples of DLJ’s peers. Who are those peers? Why do they qualify as peers?
5. At what prices should DLJ be offered? Think carefully about your answer here. The offering price need be identical to your
answer to question 3.
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