Silver Lake Nasdaq& Instinet Harvard Case Solution & Analysis

Question 1

From a qualitative perspective (using, for example, the ME-ME-ME framework), and using information provided in the case, separately analyze the two investments of the proposed deal from Silver Lake’s perspective:

  1. Instinet IB
  2. Inet / Nasdaq

The analysis of the investments of the two proposed deals has been performed from a qualitative perspective as followed by using the ME-ME-ME framework.

Qualitative Analysis of Instinet IB Deal

The ME-ME-ME framework has been applied to analyze the proposed deal of Instinet. This is explained as follows:

First, we need to analyze the business environment of Instinet.


Instinet IB is one of the largest providers of brokerage services. The brokerage and the exchange landscapes had begun to evolve rapidly in US. The major US exchanges were all publicly trading for the profit enterprises. However, the business environment had become quite difficult during 2003 because the markets began to experience a severe decline and increased volatility, primarily as a result of weak and uncertain economic climate, which together with corporate governance and accounting concerns, contributed to lower equity prices, a reduction in corporate transactions, increased market volatility.

The growth volume of trading in the major US equity securities began to decline after 2002 and continuedtill 2003. However, after 2004, the market for the US trading equities was thought to have evolved because a hybrid market had been created for automating the order execution to simplify the trading process. In addition, a number of barriers to entry had been introduced in the industry such as ATSs and ECNs. Apart from this, there were a number of regulations, which were created by SEC for addressing the issues related to the interaction of the trading centres. Regulation, NMS, addressed a number of issues in the equity markets in US. All of these factors suggest that the macro environment has been improving and showing signs of growth beyond 2005.

Silver Lake Nasdaq& Instinet Harvard Case Solution & Analysis


Instinet is highly competitive in the market as its trading services were tailored to each customer’s unique trading requirements. The company had a number of strengths such as its undeniably pure agency brokerage services. It helped the customers to execute their trading efficiently, minimize the market impact,and maximize their returns. The technology of the company was designed to route the best prices. The company was continually developing its products to offer new services to its customers. The business in which the company operates is highly competitive and Instinet competes with large investment banks, brokers, dealers and specialty electronic brokers. The company has also faced intense price competition but it has created its own place in the market.


The company has asset managers and fund managers which manage the trading activities of the company quite well. However, it is not clear which exit option they would choose. An IPO was not suitable for the company until it achieved consistent growth in cash flows. In addition, there were not many buyers, which have placed a bid for the company.

Second, we need to understand that, in what waysthe buyout creates a positive NPV...................

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