Succession, Transition, or Exit: Greentown's Founder's Decision
(7 pages of text)
Case (Pub Mat)
In 2014, Song Weiping, the founder, chair, and major shareholder of the high-end residential property developer Greentown China Holdings Limited (Greentown), based in Hangzhou, China, had started to consider decreasing his involvement in his company. Without any family to provide an obvious successor, Song had to evaluate different ways to leave the business he founded. The alternatives ranged from selling all or part of his holdings to keeping his shares but having someone else manage the company. If he chose to resign his position as chair and remain as a financial investor, he would have to find a suitable successor to act as chief executive officer. If he chose to sell his interest in the company, what criteria should he use to determine the best buyer or buyers? How much should he sell, and how could he determine a fair price?
This case can be used in an undergraduate, or graduate finance course to discuss valuation and the impact of different factors on the valuation of equity stakes in firms with a significant major shareholder. The case can also be used in a course on family business to look at succession issues and differences in the valuation of family and non-family businesses. The case introduces the concepts of exit strategies, succession, and transitions and examines issues involved in succession planning for family businesses by examining potential exit strategies for the founder and chair of a large real estate development company. After working through the case and assignment questions, students will have developed their ability to do the following:
- Explain when and why a founder may wish to exit a business.
- Analyze the pros and cons of different exit strategies under different circumstances.
- Examine the valuation of a publicly traded company and describe the effects on the valuation of factors such as the presence of a major controlling shareholder.
- Outline the real estate industry in China.
Real Estate and Rental and Leasing
China, Large, 2014
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