Business school professors’ picks

Welcome to professors’ picks, offering a weekly curated selection of FT articles by and for business school faculty to connect classrooms to current events and to develop students’ critical thinking.

Read all submissions at www.ft.com/bschoolpicks. Save this link in myFT to receive emails alerting you to each new edition. Search the tags for relevant topics to illustrate teaching points. Encourage students to join the debate in the comments section beneath the article.

Comments or contributions? Get in touch at profpicks@ft.com 

Strategic Financial Management

Chinese carmakers pledge faster supplier payments as price wars intensify

Tags: Strategic cash management, working capital, buyer power, competitive dynamics

Summary: In response to intensifying price wars and increased pressure on suppliers, leading Chinese automakers including BYD, Geely, Xiaomi, GAC and FAW have promised to shorten supplier payment cycles to 60 days, aligning with new regulations from China’s Ministry of Industry and Information Technology (MIIT). This shift marks a move from long-standing industry norms, where suppliers experienced payment delays of up to 200 days, and often accepted promissory notes instead of cash, straining their liquidity.

The government’s intervention reflects concerns over ‘supply chain financing’, when automakers used deferred payments to fund working capital, excessively burdening smaller suppliers. Steep price cuts such as BYD’s Seagull EV priced at just $7,770 have intensified the strain, with upstream industries like steel, opposing demands for unsustainable cost reductions of over 10 per cent and delayed payments. Analysts like UBS’s Paul Gong attribute these practices to excess capacity, which forces suppliers to accept unfavourable terms to retain business. The new 60-day rule, effective June 2025, aims to stabilise the supply chain by ensuring timely payments, but it challenges automakers already grappling with razor-thin margins.

Classroom application: The case facilitates an interactive lecture on working capital metrics such as days payment outstanding (DPO), cash conversion cycle (CCC), supply chain financing and liquidity ratios.

A role-play simulation as a classroom activity, highlighting data (eg BYD’s 100-day DPO vs new 60-day rule) using infographics, and setting up three groups of learners as automakers (who argue for flexibility), suppliers (who demand faster payments) and regulators (who enforce 60-day rule), would provide interesting insights on industry dynamics. The groups could negotiate terms under three scenarios of status quo, full compliance and hybrid solutions (eg discounts for early payments).

Questions:

• Trade-offs in Working Capital: How do extended payment terms (eg 200 days) benefit automakers’ cash flow, and what risks do they pose to supplier solvency and innovation?

• Regulation vs Market Forces: Is the 60-day payment rule an effective solution, or could it inadvertently harm automakers’ competitiveness? Compare with self-regulated industries (eg Tesla’s supplier terms)

• Supplier Power and Dependence: Why have suppliers historically tolerated promissory notes and delays? Discuss any potential strategies for suppliers to regain leverage (eg diversification, tech adoption)

• Global Best Practices: Contrast China’s approach with Western automakers’ supplier terms. Are shorter payment cycles a sign of mature supply chains or stricter governance?

This case highlights the tension between competitive pricing, working capital management and supply chain sustainability, offering insights into regulatory roles and power dynamics in hyper-competitive industries.

Niran Subramaniam, Associate Professor, Henley Business School

Corporate Finance

US chipmaker Qualcomm agrees to buy UK’s Alphawave in $2.4bn deal

Advent swoops for London-listed Spectris in £4.4bn deal

US quantum computing company IonQ to buy Oxford university start-up

Tags: Corporate Finance, M&A and strategy, Cross border M&A, Valuation, PE Takeovers, M&A Motivation, Bid Premiums, Tariffs, Geopolitical Risk

Summary: Mergers and acquisitions (M&A) raise several questions. The three articles, which were all published in the FT on June 10, provide an ideal platform for discussing some of those questions. I often relate the questions to the ‘six honest serving-men’ who taught Rudyard Kipling all that he knew, namely: “What, Why, When, How, Where and Who”.

First, the three articles provided a good definition of what M&A is. The first involves an agreed takeover of a UK chip designer by a US technology company. The second reports on an offer by a private equity group, Advent International, to acquire industrial group Spectris. The third is a takeover by US quantum computing company IonQ of an UK technology start-up, which was spun out of Oxford university.

The reasons for these three takeovers (why) are different, but in the end, they can be summed up as creating synergies. The timing (when) is controversial as these bids happened when the volume of takeovers is at its lowest, partly due to significant increase in geopolitical risks. The process (how) and the financing methods are also different across the three bids, as while Alphawave shareholders can choose to accept the offer in cash or Qualcomm stock, the Advent deal is for cash, and the Oxford Ionics private shareholders will receive IonQ’s common stock. The deals involve US firms (who) acquiring UK (where) targets.

Classroom application: The three articles provide a good catalyst for debating growth strategies through internal investments relative to M&A, the wider implications of foreign bidders taking over UK public and/or private firms and the decline in the number of listed companies on the London Stock Exchange.

The excessive bid premiums constitute a wider discussion on whether M&A creates or destroys value. For example, the Qualcomm cash offer is equivalent to a 96 per cent premium relative to Alphawave’s share price. The market reaction to M&A is another controversial issue and the Advent bid is a good illustration as the share price of Spectris rose by 69 per cent on the announcement of the bid, while for bidders the market reaction is often negative. Finally, as well as illustrating the financing method that can be used in M&A, they remind us of the debate around whether it is better for shareholders to opt for cash or shares — when they are offered the options. 

Questions:

• Are takeovers of UK companies by foreign bidders good for the UK economy because they help grow UK companies and GDP, boost tax revenue and create jobs?

• Companies are expected to make financial decisions (investments, financing and allocation of profits) to create value for shareholders. What would make M&A create value? Which of the three bids do you expect to create value and why?

• Do you think the timing of the bids is appropriate? What are the major risk factors, and do you consider that the current geopolitical risk offers a good opportunity for, particularly, cross border M&A?

• Consider the valuation of the three bids. Which one do you think offers the highest bid premium?

• Assume that you are a shareholders of the target companies. Would you accept that the takeover should go ahead? If so, at what stage of the takeover bid would you be willing to sell your shares?

• One of the bids is offering the target shareholders a choice of shares or cash. What do you consider to be the main factors affecting the decision of the target shareholders? If you opt for shares, how would you account for the impact of the exchange rate, in this case the dollar relative to the pound?

Meziane Lasfer, Professor, Bayes Business School

Finance

Junk bond sales surge as companies try to beat fresh tariff uncertainty

Disciplines: Finance, International Entrepreneurship, International Strategy, Currency exchange, Fixed income

Tags: International Finance, US Dollar, Diversification, US Treasuries, US Trade

Summary: According to the article, US companies with weak credit ratings are rushing to sell junk bonds ahead of the possible expiration of the 90-day pause on President Trump’s “liberation day” tariffs. The extra costs that risky corporate borrowers are willing to incur are known as spreads, and they jumped from 3.5 per cent to 4.61 per cent between April 1 and 7. The head of US Bancorp is not surprised and said he expects companies to take advantage of the volatility, before a possible resurgence of instability due to tariffs and tax bill discussions and negotiations.

Classroom application: This article provides a good catalyst for continuing the debate inside business school classrooms about how economic policy decisions (eg fixed income trends) affect company financing and corporate profitability. It continues a theme interwoven into so much FT content: in 2025, everything in business — currencies, bonds, inflation, consumer sentiment, and corporate financial planning — is inextricably linked. This is a sobering reminder that while the article focuses on junk bonds, the US is not alone in the world. The referenced Ice BofA data further confirms these trends as do the worldwide actions of different investors.

Questions:

• Do you believe companies are acting too quickly by rushing to sell bonds now?

• What do you believe is the probability that the 90-day pause will be extended?

• What are the implications if the pause is extended?

• What are the implications if the high tariffs are implemented again?

• What are the risk and return implications of investing in junk bonds?

• To what extent is highly rated corporate credit worth the financial security, even if you give away access returns?

Case discussion positioning: Here are other associated articles:

At the end of 2024, global corporate borrowing climbed to a record $8 trillion.

In January, fund managers were bullish on the high-yield bond market outlook.

What a difference only a few months make.

Bankers are now encouraging companies to be proactive with their fundraising.

Investors go all over the world as water seeks its own level, with companies now flocking to China and the EU in search of returns (and diversification).

Gregory Stoller, Master Lecturer, Boston University Questrom School of Business

Got feedback on professors’ picks or willing to contribute? Get in touch at bschool@ft.com or add your selected articles and questions in the comments below.