MADISON – As vice president and chief financial officer of Plexus, a global electronics manufacturing corporation in Neenah, Wis., Ginger Jones was skeptical. She wasn’t sure college students could come up with sound, practical advice her business could use.
“We make real-world decisions,” Jones says. “I was concerned that students might not take it seriously.”
But today, the company’s stock price is up significantly after a $200 million share repurchase recommended by UW-Madison graduate students, and Jones is a believer.
Determining how much debt and equity a major company should have on its balance sheet is no small time proposition. Jones had outside firms such as J.P. Morgan, Goldman Sachs and Robert W. Baird look at the same issue the students worked on. If she had initial misgivings, they disappeared when she discovered what the students were capable of doing.
“The research the students did was on a par with the investment bankers. We took many of the recommendations of the students and put them into play,” Jones says. “When you do a share repurchase, you should see a 6 to 8 percent increase, and [as of mid-April] we’ve seen 7 percent since the end of February, which is pretty impressive in a shaky market.”
The Plexus project was carried out under the supervision of UW-Madison business associate professor Jim Seward, who directs the Wisconsin School of Business’s Nicholas Center for Corporate Finance and Investment Banking. The Nicholas Center’s intensive, hands-on approach to applied learning makes it unique among the nation’s MBA programs.
Each semester, Seward approaches companies like Plexus – many of them repeat customers – to propose corporate finance projects for his students to tackle. Dozens of firms have taken him up on the offer since the program’s 1999 inception.
“We can tell companies, ‘You’ll get the best, most unbiased academically based thinking on your problem,'” Seward says, contrasting the program’s free advice with that of paid private consultants that have a vested interest in a company following their recommendations. “We’re not a consulting firm. We’re as unbiased as you can get.”
Some of its clients have been major businesses headquartered in Wisconsin, such as Plexus, American Family and Johnson Controls, as well as a number of high-tech startup companies spun off from UW-Madison research. But the client list doesn’t stop at the borders of the state. It also includes familiar names such as Barnes and Noble, Procter and Gamble, Norelco, Quaker and Nike.
When they dive into the world of corporate finance, Seward’s students get a total immersion.
“They feel they’ve been pushed into the deep end of the pool with no lifeguard and no flotation device,” Seward says, describing the “semi-chaotic” beginning of each semester. That’s because the immersion takes place not in the safety of the classroom but in real-life financial situations where the answers are not simple or obvious.
Students are challenged to come up with solutions with a minimal amount of direction – something Sean Lavin regards as a definite plus.
“(Seward) doesn’t tell us there is one way to complete a project, and instead lets us take it in the direction we want to and learn for ourselves,” says Lavin, a current student who worked last fall on a group assignment for Mason Wells, a Milwaukee private equity firm that invests in middle-market companies valued between $250 million and $1 billion.
Bill Krugler, Mason Wells managing director, is a repeat customer of Seward’s program. Most recently, he tasked students with scoping out a new market segment: analytical instruments and services, which specializes in engineered products used in pharmaceutical companies, clinical laboratories, and the food and beverage industry.
“Their work was to take an industry segment to find out how attractive that segment would be for investment by Mason Wells,” Krugler says. He told the student team, “We want you to come back and say yes or no, is it a good place for us to invest, and then take it down to the level of [identifying] specific companies.”
Krugler makes it sound simple, but the students found it daunting at first. “The project seemed difficult due to the fact that Mason Wells was targeting companies that were private, and private companies are the most difficult to find information on,” says Lavin. “Also, the industry was foreign to our group, creating an extra hurdle.”
Krugler says the unstructured approach was not an accident. “This project is a little different than a lot of projects. It’s kind of loose. Here it takes some creativity” in figuring out where to go to get information, he says. “We leave it broad intentionally.”
That is where Seward’s approach to teaching the class pays off. “As undergrads, they’re used to being told what to do and how to do it: Here’s the syllabus, here’s what you have to do, here’s when it’s due. The instructor will tell you if you’re right or wrong,” Seward says. “Then they get these projects. They finally get it at the end. There is no right or wrong, there’s just your answer.”
Lavin feels the best decision he and one of his class partners, Heather Pahl, made was to do their research beyond the classroom and even beyond Wisconsin at Pittcon, a huge industry conference in New Orleans. The challenge of researching an industry that was new to them made the trip essential to their success. (Voluntary corporate and private donations defray the travel expenses of Nicholas Center students.)
“The insight we gained from speaking with vendors, companies and various industries could not be duplicated with online searches or academic research. Also, being able to see the devices on display was a tremendous advantage when doing our research or presenting to Mason Wells,” Lavin says.
After the Pittcon trip, Lavin gained confidence that he would have the answers Mason Wells expected. When he came back with a solid list of companies to recommend for investment, Krugler was impressed.
“A number of the companies are ones we had not seen or identified. We’re now following up to see if they’re interested in being acquired or invested in,” Krugler says.
While companies derive a practical benefit from the Nicholas program, they also believe its benefit to students is profound. Says Plexus’s Jones, “The student gains an interesting experience because they can use what they learn in the class and apply it to the real world. It’s a great way to use theoretical information.”
In fact, that is what caught Sean Lavin’s eye when he was looking for a master’s program. “The projects of the corporate finance program are a big reason for coming to Wisconsin to get my MBA.”
While the students carry out the projects with minimal direction from their professor, Jones and Krugler have nothing but praise for Seward’s leadership of a program that provides genuine benefits to business and industry.
“It helps that Jim is viewed as a professor who understands business,” Jones says. “His role is critical. He’s really good at bridging that gap between the theoretical and the practical.”
Editor’s note: This story is part of a biweekly series focusing on The Wisconsin Idea in action. For more, visit http://www.wisconsinidea.wisc.edu/.
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– Bill Graf, (608) 265-0476, wlgraf@wisc.edu
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