Selection of Cases

As outlined before, the selection of the cases plays an integral role for the robustness of the study. In a first round, cases were identified that predict similar results for the literal replication. For this identification, midcap companies were chosen that indicate no obvious problems in the upcoming refinancing as outlined in section 1.3.4. These are companies that

(a) were able to increase their operational performance (identified by an increased operational margin) since the original standard mezzanine financing was obtained to (partially) repay the standard mezzanine facility from retained earnings and/or

(b) showed a leverage ratio at the time of the refinancing at or below 3.5 times EBITDA which is seen as a basis to obtain new external debt for the refinancing (Adam et al., 2014; PwC, 2011).

Case 1, Case 2, Case 5 and Case 6 comply with both criteria, whereas Case 3 was able to reduce its debt towards a comfortable leverage ratio but showed a deteriorating

Unit 3: Manager decision

patterns

Unit 1: Financing strategy and determinants for the decision

• RP1: A formulated financing strategy exists and has been

applied to in the refinancing process

• RP2: A targeted optimal financing structure exists and

refinancing of the standard mezzanine has been based on a pecking order approach (internal funds first, then external debt, then new equity)

• RP3a: The corporate strategy and the experience of the

management team influence the determination of the refinancing instrument

• RP3b: Relevant indicators influence the determination of

the refinancing instrument

5.2 _{Unit 2:}

Refinancing process

• RP4a: The management has implemented procedures

and measures to facilitate a successful completion of the refinancing

• RP4b: The management team executed a timely

refinancing process to avoid an increased risk

5.3

operational performance. Nevertheless, given the still positive operational margin this case has been also introduced to the literal part of the case study analysis.

For the theoretical replication, cases were selected that did not comply with the two criteria. These are Case 4 and Case 7. Figure 4.4 provides an overview on the cases that formed the multiple-case design.

Figure 4.4: Operational Development of the Cases

Source: Own illustration.

The researcher advised some of the cases in the refinancing of their standard mezzanine instrument. Debt advisors supported four out of the seven cases analysed in this research. Cases were numbered to ensure anonymity and have been numbered in the sequence of the performance of the semi-structured interviews during the data collection phase. The companies analysed in Case 5, Case 6 and Case 7 have not used a financial or debt advisor during their refinancing. Therefore, the researcher used a gatekeeper for approaching these companies to facilitate access to the respective interview partners (Newby, Watson & Woodliff, 2003). Nevertheless, given the duration and the depth of these interviews it can be identified that the personal involvement of the researcher in the other cases must be seen as an advantage to get a more detailed and open feedback from the participants as well as access to extensive company information.

Sales (in €m) EBITDA (in €m)

A B

Leverage (bank debt + Mezzanine / EBITDA) EBITDA-margin (in %)

The cases cover every year of the refinancing window and a broad variety of standard mezzanine providers. Case 2 and Case 3 both cover the same standard mezzanine programme, whereas Case 4 explores a company that used two different mezzanine tranches in 2006 and 2007. Figure 4.5 provides an overview of the selected cases and the respective standard mezzanine funds they received their financing facilities from.

Figure 4.5: Case Overview within the Maturity Profiles of German Standard Mezzanine Funds

Source: Adapted from Brüse (2011) and PwC (2011).

4.3.3 Case Study Data Quality

Data quality is an integral issue in case study research. Within the case study method, data quality is especially related to validity and reliability (Yin, 2008). Even though the term validity is often replaced in qualitative research by the term trustworthiness, given the association with the quantitative conceptualisation of the research process (P. Baxter & Jack, 2008; Leitch et al., 2009; Onwuegbuzie & Johnson, 2006), the term

validity will still be used in this study. Generalisability which is also referred to as external validity has to be considered with special attention, as case study research does not aim to be statistically reliable. Therefore, case study research is not generalisable against population, but against theory (Gillham, 2000a). However, case study research is still to be seen as robust, given the careful design and the proper use of a replication logic (Yin, 2008).

4.3.3.1 Construct Validity

A case study research complies with this criterion when the methods used are suitable for the aim of the research and allows answering properly the research questions. It

CB Mezzcap 0.2 FORCE 0.2 FORCE 0.6 H.E.A.T. 0.2 H.E.A.T. 0.3 H.E.A.T. 0.3 Puls 0.3 Prime 0.2 Prime 0.3 PREPS 0.9 PREPS 0.7 PREPS 0.3 PREPS 0.3 0.0 0.5 1.0 1.5 2.0 2.5 2011 2012 2013 2014 Case 1 Case 2 Case 3 Case 4 (1) Case 5 Case 4 (2) Case 6 Case 7 Cap ita l in € bn

has to be ensured that the factual investigation complies with the objectives of the research (Yin, 2008). Several strategies can be used to enhance construct validity of a research project. The researcher should submit interview content protocols as well as calculated ratios and interpretations of those to the interview participants for a formal sign-off (Schmittat, 2007).

Triangulation of the elements of investigation or sub-methods further enhances construct validity (M. B. Miles et al., 2013). Whereas outcomes from different elements of investigation converge towards a result, the importance and validity of such result has to be higher valued. The chain of evidence from the case study report and the analysis must be maintained.

4.3.3.2 Internal Validity

Internal validity covers the correctness of the conclusions drawn from the cases investigated (Easterby-Smith et al., 2008). It is therefore important, that the context between data collection, conclusions drawn and theories developed is ensured. This does also include the discussion of alternative explanations. Yin (2008) acknowledges, that internal validity remains a problematic area within the case study method because the methods to combine data and propositions are poorly developed.

4.3.3.3 External Validity

External validity values how the results of the research can be generalised towards a broader population (M. B. Miles et al., 2013). The case study method does not aim to achieve a statistical robust generalisability via statistical methods (Gillham, 2000a). Furthermore, case study uses replication logic – like in experiments – to allow for generalisability through analytical elements (Abernethy, Chua, Luckett & Selto, 1999). A multiple-case design enhances external validity as results drawn from the first cases are used to be substantiated, expanded or contradicted during the investigation of the next cases.

4.3.3.4 Reliability

Reliability within qualitative research means that other researchers would come to the same results by interpreting the data or that the re-investigation of the cases would lead to the same results (Easterby-Smith et al., 2008). Yin (2008) introduces three

principles to ensure reliability. The first principle is the usage of multiple sources of evidence which in this study is included by the combination of semi-structured interviews, the calculation of key financial ratios and an extensive document and information analysis.

The second principle refers to the documentation and organisation of the collected data for the study, the creation of a case study database. In this research, a case study database was developed that includes the content protocol, basic financial documents required for the calculation of the key financial ratios as well as all other received and collected documents and information.

The third principle is to maintain a chain of evidence that allows an external observer or researcher to “follow the derivation of any evidence from initial research questions to ultimate case study conclusions” (Yin, 2008, p. 122). The chain of evidence should allow to trace in either direction, also backwards from conclusions to initial research questions (Gillham, 2000a).

In addition, specific mechanisms were introduced to the research to avoid bias and ensure an appropriate ethical environment. Those mechanisms are illustrated in section 4.4.3.

The described mechanisms and elements to ensure data quality of the research are summarised in Table 4.1 below.

Table 4.1: Building in Validity and Reliability in the Research

Tests Case study tactic Phase of research

Construct validity  Sign-off of interview content

protocol by participant

 Multiple sources of evidence:

o Semi-structured interviews

o Financial report analysis and ratios

o Document review

 Review of draft by participant

 Data collection

 Data collection

 Write-up phase

Internal validity  Pattern matching  Data analysis

External validity  Replication logic (literal and

theoretical)

 Research design

Reliability  Interview content protocol

 Case study database/document

folder

 Data collection

 Data collection

To summarise the design of the case study research, Figure 4.6 displays the overall layout of the followed approach:

Figure 4.6: General Case Study Layout

Source: Adapted from Yin (2008).