Case Examples

Cases involving corporate finance, asset pricing, market microstructure, and other finance issues arise in a variety of contexts. We apply sophisticated, state-of-the-art financial models developed in academia to complex business problems.

For example, cases involving business valuation often require developing sophisticated discounted cash flow models. Other cases may require an extensive analysis of market efficiency, complex derivative valuation, or bond default probabilities. Market manipulation cases may require an analysis and understanding of market microstructure. Accounting restatement cases may involve an analysis of how stock prices would have responded to alternative financial statements.

Our consultants apply and refine the latest academic models using the most detailed data available. We have access to many public and proprietary data sources.

Economic analysis and analytic tools are used in many of our assignments. For example, antitrust cases require theoretical and empirical analyses of the behavior of firms and the extent to which a firm’s strategies (e.g., contracting, pricing, tying, bundling, or mergers and acquisitions) enhance or harm consumer welfare. Antitrust analyses can include analyzing firm incentives within a particular market context and devising empirical and statistical models to test and predict firm behavior. Intellectual property cases often feature an analysis of the effect of innovation and property protection on competition and profitability.

The intellectual opportunities in our research are especially rich because most cases require analysis that embodies a clear theoretical framework and properly applies econometric models, as well as a broad institutional inquiry into the structure of the industry, the relevant production processes, and the nature of competition. As a result we work with data (e.g., customer and transaction data from the client) and qualitative information from internal marketing or strategy documents, written communications, and testimony by industry participants.

Cornerstone Research has developed a deep expertise in addressing complex accounting issues, such as analyzing capital market responses to financial information, evaluating financial reporting in the context of the relevant authoritative guidance, and providing rigorous analysis of company economics to assess executive compensation and managerial accounting issues.

Our staff includes CPAs as well as individuals with advanced degrees in accounting. Our extensive experience supporting multiple experts on a range of issues enables us to provide effective analyses in accounting-related litigation.

LG. Philips LCD accused Chunghwa Picture Tubes and its customers, the Tatung companies, of infringing patents involving the design and manufacture of LCD modules, which are used in LCD televisions, computer monitors, and laptop computers.

Counsel for LG. Philips LCD retained Dr. Michael Keeley, a senior vice president of Cornerstone Research, to assess the damages that the company suffered due to the alleged infringement. Dr. Keeley presented his findings at the U.S. District Court in the Central District of California. After a six-week trial, the jury awarded LG. Philips LCD $50 million in damages from Chunghwa Picture Tubes, $3 million from Tatung Company, and $500,000 from Tatung Company of America—amounts in the ranges that Dr. Keeley had recommended.

Counsel for InBev N.V./S.A., retained Professor Kenneth G. Elzinga of the University of Virginia and Cornerstone Research to respond to a private antitrust suit that threatened to derail what ultimately became the largest cash acquisition in history. The suit, brought in the U.S. District Court for the Eastern District of Missouri, was filed while InBev’s proposed acquisition of Anheuser-Busch was under review at the Department of Justice and at various foreign competition agencies. Plaintiffs requested a preliminary injunction to block the acquisition. Professor Elzinga filed a Declaration in the district court case explaining why the acquisition would not lessen competition. On November 18, 2008, InBev completed the $52 billion acquisition after receiving regulatory approval from the U.S. Department of Justice and foreign competition agencies. On the same day, the district court judge denied plaintiffs’ request for a preliminary injunction.

Prior to the acquisition, Anheuser-Busch was the largest brewer in the U.S. with a market share of 48%. InBev had only a small presence in the U.S. market with no U.S. production facilities, but had extensive international operations and was one of the world’s largest brewers. Plaintiffs alleged that InBev’s presence outside the U.S. made it a potential entrant to the U.S. market that effectively disciplined the market conduct of Anheuser-Busch and other U.S. brewers. Plaintiffs conjectured that InBev was “well equipped and well financed to be able to enter the market de novo, building its own breweries and establishing its own national distribution network.” Without the threat of entry by InBev, plaintiffs claimed, incumbent U.S. brewers would raise beer prices, reduce product diversity, and suppress smaller competitors.

The economic analysis conducted by Professor Elzinga and Cornerstone Research demonstrated that the InBev–Anheuser-Busch transaction posed no threat to competition in the U.S. market for beer, and showed that plaintiffs’ potential competition theory was not grounded in the economics of the industry. In his Declaration, Professor Elzinga testified that InBev was not poised to enter the U.S. market with domestic brewing capacity and a new distribution network, that there is no historical precedent for large-scale, de novo entry into the U.S. beer market, and that recent InBev actions contradicted plaintiffs’ claim that it was likely to undertake large-scale U.S. entry.

Professor Elzinga also showed that plaintiffs’ theory was economically implausible because large-scale U.S. production of InBev’s flagship brands would erode the brands’ value as high-quality imports and require substantial, high risk, long-term investment to re-position them as essentially new, domestic brands. His Declaration also explained that Anheuser-Busch faces significant competition in the U.S. market from MillerCoors and other domestic and foreign brewers, and that the merger would not give the combined firm any more market power than Anheuser-Busch had as a stand-alone firm.

The court denied plaintiffs’ request for an injunction, noting that “InBev has provided objective evidentiary support for its claim that it was not a potential de novo entrant into the United States beer market,” and that “...[d]efendants have provided significant economic facts to support a finding that InBev cannot realistically be considered a potential competitor....”