The deal also has a lot of benefits. To value Ducati we can use the APV-model. They could also compare with a car company, like Ferrari, that has a lot of clothing and accessories that they sell.
They need to find out what the Ducati should be earning and around these assets construct an international company. A bankruptcy of Cagiva after a closed deal could lead to a delay of the deal for up to four years and this would be cost them a lot of money.
They also need to start up and arrange the NewCO establishment, the senior debt and write at least thousands of checks on their first day. What is the nature of the opportunity? This is usually not the case in the U. The investments are made in privately hold firms that are either unlisted from the beginning or that is being delisted from the stock exchange under the LBO process.
Ducati has a lot of problems that I already covered under the first question. This is probably were the cultural difference is most prominent. APV treats the firm as it is all equity financed. Instead he saw the potential of an investment and contacted Halpern since they were looking for a joint investment.
According to the article the negotiations in the US are done more in a linear path but the negotiations with Cagiva can best be described as a circular path.
The risk premium that we are going to use is 7. The core business possible growth was considered as high when comparing their number of sales to Harley-Davidson sales. Which risk free rate of interest should be used? Then we have a badly manage management by the Castiglioni brothers who continues to shop around for other deals even though they signed the Letter of Intent.
But they were under great financial pressure and faced severe problems in both manufacturing and financing.
The brand is well-known and easy for investors to understand. Ducati could look at the products Harley-Davidson is selling and how their selling them. The article describes that Ducati was in a great position of becoming for street bikes as what Harley-Davidson was for cruisers.
If they sign the deal TPG can expect to take over a mismanaged company under financial distress that has great potential through its strong brand and manufacturing fundamentals. TPG have signed a Letter of Intent with the Castiglioni brothers and are trying to build a model that captures their payback.
For the valuation of Ducati, observe that since this is a leveraged buyout, the debt-to-equity ratio will change drastically, and you need to handle this in the appraisal model you use.
The reporting of their financial performance is not transparent at all instead it is entangled with the Cagiva Group.
They need arrange the financing to be able to recover from the distress and to start making some money.Related Documents: Kristen's Cookies Case Study Solutions Essay Essay about Kristen Cookies Case.
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