WineInStyle: If the Price is Right

With the Board split on such a fundamentally important decision for the future of the Company, Eberhart should suggest that the Board temporarily hold off on making the decision about whether to sell to the Japanese investor group. As the case mentions, the company could really use the cash. However, since the identity of the Japanese investors is unknown, it could easily be a competitor trying to look under the hood before reneging on their offer. Additionally, it's certainly possible that there is an even better offer out there, and it's next to impossible to evaluate this offer without the offer price and the expected cash flows of the company.

Although the company clearly needs a cash infusion, that does not mean they need to vote on a deal today. The company can act on some of the cost-cutting measures mentioned at the end of the case to keep the company running smoothly while the Board takes its time to make an informed decision. In the meantime, the Board should look into hiring a small, boutique investment bank, potentially a Japanese / Asian regional bank (or find some other type of broker if the deal is too small for a bank - perhaps Topol would be up for a side project). The bankers can help with the following:

1. Conduct due diligence on the Japanese investor group to confirm that the offer is serious
2. Run a broad auction process and analysis of other strategic alternatives to figure out the best option for the company from a valuation perspective
3. Perform a fairness opinion on the offer from the Japanese investor group to confirm that the offer is within a fair range of values

After the bankers have performed their work, the Board can tick through the following options available to them:

1. If the auction yields a higher offer from a reputable investor, vote to take that offer if it is within the range of values included in the fairness opinion
2. If the offer from the Japanese investors remains the highest offer, then:
1. Accept the offer if it is within the range of values included in the fairness opinion (and if the bankers can identify the Japanese investors through the DD)
2. If all else fails, the Board should reject the offer and continue to run the company, while instituting the cost cutting measures identified in the case on p13. The Board can also consider a smaller cash infusion from Eberhart and the other existing investors (or friends / family / a VC firm not identified by the bankers) to alleviate the working capital concerns

Throughout this process, Eberhart should focus solely on the offer price and the potential cash flows of the company. While tempting, if he factors in his support for CEO Khoo's career and his desire to spend more time in Palo Alto with his family, he could leave himself open to a potential lawsuit from other investors.