Case Study Description of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment
In February 2013, John Carroll and Alexander Whittemore, both managing directors at Summit Partners (Summit), are considering an investment in RoboSoft, LLC (RoboSoft), a provider of data-center automation, business intelligence, and security software solutions, primarily for the IBM i operating system. Summit had previously invested in RoboSoft, and did well when it exited the company in 2007. Over the ensuing years, Summit had followed RoboSoft and was considering a second investment in the company when it was put up for sale again in late 2012. This time, Summit planned to invest $103.6 million from its growth equity fund and $43.9 million from its subordinated debt fund to buy out the company. This case is designed to introduce students to mezzanine investments. Because the deal involves both an equity and a subordinated debt investment, students can compare the investment considerations and return expectations of both types of investors. The case contains the actual deal team's investment memorandum summarizing the merits of the RoboSoft investment. The students are asked to qualitatively evaluate the potential benefits and risks of the investment from the perspective of a debt investor and an equity investor, and to quantitatively calculate the internal rate of returns (IRRs) and cash-on-cash returns (CoCs) of Summit's equity and subordinated debt fund investments. This case is appropriate for classes that survey private equity investments, or for corporate financing classes that wish to compare the risk and return of equity and debt investments. It is assumed that students have taken valuation courses and understand residual equity cash flow valuation methods. There are Excel files-one for students, one for instructors-to support analysis of this case.
Authors :: Susan Chaplinsky, Alexander D. Whittemore
Swot Analysis of "Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment" written by Susan Chaplinsky, Alexander D. Whittemore includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Robosoft Summit facing as an external strategic factors. Some of the topics covered in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment case study are - Strategic Management Strategies, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment casestudy better are - – wage bills are increasing, increasing commodity prices, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Robosoft Summit, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Robosoft Summit operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment can be done for the following purposes –
1. Strategic planning using facts provided in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment case study
2. Improving business portfolio management of Robosoft Summit
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Robosoft Summit
Strengths Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Robosoft Summit in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment Harvard Business Review case study are -
Learning organization
- Robosoft Summit is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Robosoft Summit is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Robosoft Summit is present in almost all the verticals within the industry. This has provided firm in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High switching costs
– The high switching costs that Robosoft Summit has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Finance & Accounting field
– Robosoft Summit is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Robosoft Summit in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Robosoft Summit has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Robosoft Summit in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Robosoft Summit are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Robosoft Summit is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Robosoft Summit has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Robosoft Summit has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Robosoft Summit is one of the most innovative firm in sector. Manager in Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Robosoft Summit
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Robosoft Summit does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment firm has clearly differentiated products in the market place. This has enabled Robosoft Summit to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Robosoft Summit to invest into research and development (R&D) and innovation.
Weaknesses Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment are -
Skills based hiring
– The stress on hiring functional specialists at Robosoft Summit has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Robosoft Summit has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment can leverage the sales team experience to cultivate customer relationships as Robosoft Summit is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Robosoft Summit is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Robosoft Summit products
– To increase the profitability and margins on the products, Robosoft Summit needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment HBR case study mentions - Robosoft Summit takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
No frontier risks strategy
– After analyzing the HBR case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Increasing silos among functional specialists
– The organizational structure of Robosoft Summit is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Robosoft Summit needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Robosoft Summit to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Robosoft Summit, firm in the HBR case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Robosoft Summit has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Robosoft Summit has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Robosoft Summit can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Robosoft Summit can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Developing new processes and practices
– Robosoft Summit can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Robosoft Summit can use these opportunities to build new business models that can help the communities that Robosoft Summit operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Robosoft Summit in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Robosoft Summit can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Robosoft Summit is facing challenges because of the dominance of functional experts in the organization. Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Robosoft Summit can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Robosoft Summit can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Robosoft Summit can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Robosoft Summit can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Robosoft Summit to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Robosoft Summit can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Robosoft Summit can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment are -
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Robosoft Summit can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Robosoft Summit in the Finance & Accounting sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment, Robosoft Summit may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Consumer confidence and its impact on Robosoft Summit demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing wage structure of Robosoft Summit
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Robosoft Summit.
Shortening product life cycle
– it is one of the major threat that Robosoft Summit is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Robosoft Summit has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Robosoft Summit needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Robosoft Summit.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Robosoft Summit in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Robosoft Summit needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Stagnating economy with rate increase
– Robosoft Summit can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Summit Partners and RoboSoft, LLC: Mezzanine Debt Investment is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Robosoft Summit needs to make to build a sustainable competitive advantage.
