...09902787224 MEDIA MANAGEMENT CASE STUDY : 1 The verb Manage comes from the Italian maneggiare (to handle especially a horse), which in turn derives from the Latin manus (hand). The French word management (later management) influenced the development in meaning of the English word management in the 17th and 18th Centuries. Management has to do with power by position, whereas leadership involves power by influence. Q1) Explain the meaning of Management? Q2) What are the functions of management? Q3) Explain one function of management in brief? Q4) Explain the branches of management towards the end of 20th Century? CASE STUDY : 2 A management buyout (MBO) is a form of acquisition where a company’s existing managers acquire a large part or all of company. Management buyouts are similar in all major legal aspects to any other acquisition of a company. The particular nature of the management buyout lies in the position of the buyers as managers of the company and the practical consequences that follow from that. In particular, the due diligence process is likely to be limited as the buyers already have full knowledge of company available to them. The seller is also unlikely to give any but the most basic warranties to the management, on the basis that the management know more about the company than the sellers do and therefore the sellers should not have to warrant the state of company. These are several ways of financing a management buyouts. Q1) Explain the...
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...Although high-net-worth investors have been buying large positions in companies since the days of Carnegie and Rockefeller, the modern aspects of the industry took shape in the 1960’s through the efforts of Kohlberg, Kravis, and Roberts, three Bear Stearns bankers who would later form the eponymous private equity firm KKR. PE activity then grew rapidly in the 1970-80’s when a large number of family businesses that were started after WWII were struggling with succession concerns and an inability to continue organic growth. PE firms saw this uncertainty as an opportunity to “flip” these companies for a profit by acquiring them, restructuring their operations, and then either finding a strategic buyer or taking the company public. Around this same time was the start of the technology boom and rise of Silicon Valley, causing an influx of capital hoping to fund the next big growth story. This large amount of eager capital spurred the creation of PE firms to facilitate investment opportunities which led to the industry standards we have today. The first task for any aspiring private equity firm is to raise the pool of assets utilized for pursuing investment opportunities. Since its inception PE has been the domain of high-net-worth investors, and as a result PE firms source their capital from high value clients such as pension funds, university endowments, sovereign wealth funds, and the fund managers’ own personal wealth. Given a finite number of potential investors, PE firms compete...
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...report analyzes RJR Nabisco company as a potentially candidate for leverage buyout. It focuses on the major problems and risk of RJR LBO and provides some recommendations for this case. RJR Nabisco began as a tobacco company in 1875, and the extent to establish food business. The main bidding group includes KKR, The Management Group and The First Boston Group. Several features of RJR Nabisco made it a particularly attractive LBO candidate. The factors leading to election of the lowest bid and major risks will be analyzed in this report. This report adopts Problem-Oriented Method to analyze the RJR Nabisco case study. Table of Contents Core theme for RJR Nabisco LBO 3 sub-theme for RJR Nabisco LBO 4 Major problems 4 Major risks 5 Conclusion: 6 Recommendations: 7 Reference: 7 Core theme for RJR Nabisco LBO RJR Nabisco exhibited steady growth which was unaffected by business cycle. Moreover, RJR had low capital expenditure and a low debt level. Therefore, the firm was a particularly attractive LBO candidate. RJR's problems appeared fixable. Between 1985 to 1988, the return of firm on asset declined from 15.5 per cent to 11.5 per cent. Moreover, inventory turnover fell from 10.0 to 3.9. For solve these problems, RJR had potential for value creation and used discounted-cash-flow methodology to determine value. The quality of the bidding team includes KKR, Management Group, and The First Boston Group, which is a key factor to success. (Michel...
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...Rawat G13095 Vikram Bhatt G13116 A leveraged buyout (LBO) is when a company or single asset (e.g., a real estate property) is purchased with a combination of equity and significant amounts of borrowed money, structured in such a way that the target's cash flows or assets are used as the collateral (or "leverage") to secure and repay the money borrowed to purchase the target-company/asset. Since the debt (be it senior or mezzanine) has a lower cost of capital (until bankruptcy risk reaches a level threatening to the lender[s]) than the equity, the returns on the equity increase as the amount of borrowed money does until the perfect capital structure is reached. As a result, the debt effectively serves as a lever to increase returns-on-investment (ROI). The purpose of a LBO is to allow an acquirer to make large acquisitions without having to commit a significant amount of capital. A typically transaction involves the setup of an acquisition vehicle that is jointly funded by a financial investor and management of the target company. Often the assets of the target company are used as collateral for the debt. Typically, the debt capital comprises of a combination of highly structured debt instruments including prepayable bank facilities and / or publicly or private placed bonds commonly referred to as high-yield debt. India has experienced a number of buyouts and leveraged buyouts since Tata Tea’s LBO of UK heavyweight brand Tetley for ₤271 million in 2000...
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...BUS 330 Business Finance Online Final Examination Question 1: Chapter 11 Industries that generally perform well when other industries are performing well are referred to as: A. diversified industries. B. cyclical industries. C. risk-free industries. D. systematic risk industries Question 2: Chapter 12 Discuss how betas are measured for individual stocks. Betas are measured by plotting the historic returns of the stock against the market portfolio during the same period of time. Often times, another index is used instead of the market portfolio. The beta of the stock is the slope of the straight line drawn that best fits the observations of the plotted data. A slope of greater than 1.0 typically means that a stock’s returns are more volatile, while a slope of less than 1.0 typically means that the stock’s returns are less volatile than those of the market portfolio (or other index). Question 3: Chapter 13 The company cost of capital for a firm with a 65/35 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be: A. 7.02%. B. 8.63% C. 10.45%. D. 13.80%. Question 4: Chapter 14 When a firm issues 50,000 shares with a par value of $5 for $22 per share, additional paid-in capital will: A. decrease by $250,000. B. increase by $250,000. C. increase by $850,000. D. increase by $1,100,000. Question 5: Chapter 15 How do firms make initial public offerings and what are the costs of such offerings? When a firm makes an...
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...JOHN M. CASE COMPANY Mergers and Acquisitions OCTOBER 6, 2015 FINA 5513D - MERGERS AND ACQUISITIONS Syed Ali Ahmad (100978220), Long Thanh Dinh (100986227) Zeeshan Halim (100986227) Table of Contents Executive Summary .................................................................................................................. 2 Why the J.M.C. Company is an Attractive Target for the Firm’s Management ............... 3 Why purchase the J. M. C. Company by LBO ...................................................................... 4 Target Selection ...................................................................................................................... 4 Industry ................................................................................................................................... 4 Improve Operational Performance .......................................................................................... 5 Management Competence ....................................................................................................... 5 Valuation of the LBO................................................................................................................ 6 LBO Financing Structure......................................................................................................... 7 Ownership Retention ................................................................................................................ 8 Expansion...
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...UVA-F-1508 Rev. Oct. 5, 2009 THE BUYOUT OF AMC ENTERTAINMENT In July 2004, Sean Penmeyer, a principal at J.P. Morgan Partners (JPMP, the private equity arm of JPMorgan Chase & Co.), was in the midst of formulating the final terms of a public-to-private buyout proposal for AMC Entertainment Inc. (AMCE). Always alert for new investment opportunities, JPMP had invested in the theater industry before and had started a process earlier that year to learn more about the current state of the market. The interest was prompted by a gradual recovery in theater attendance since the recession and post–September 11 downturn. Big hits in 2002 and 2003 such as Spiderman, Finding Nemo, Lord of the Rings, and Matrix Reloaded had brought crowds back to the theaters and increased merger and buyout activity in the sector. Through various industry sources, Penmeyer had learned that AMCE might be looking for potential investors. On April 30, 2004, a senior partner at JPMP telephoned Peter Brown, chairman, president, and chief executive officer of AMCE, to gauge his interest in further discussions with JPMP. Earlier in the year, AMCE’s board had explored several opportunities to create value for shareholders. Those included acquisitions, strategic combinations with other theater companies, and a possible recapitalization of the company to simplify its capital structure. Several past investments, including a $250 million equity infusion by Apollo Management, L.P., in 2001, had left AMCE...
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...Appendix VI: Hertz Corp. Case Study Overview: The Hertz buyout is one of the largest private equity deals. It drew criticism in the media and from union members, after the company’s new owners paid themselves $1.3 billion in dividends not long after the transaction closed and ultimately financed the payments by selling stock to the public. The company has realized hundreds of millions of dollars in improved financial results annually, but also has cut thousands of jobs as it has sought to make operations more efficient. Figure 7 provides an overview of the LBO transaction, including a time line of key events. Background: Hertz says it is the world’s largest general use car rental company, with approximately 8,100 locations in about 145 countries. Hertz also operates an equipment rental company with about 380 locations worldwide, although car rentals accounted for 80 percent of 2007 revenues. Ford Motor Co. had purchased an ownership stake in Hertz in 1987 and purchased the company outright in 1994. CD&R executives said that the firm emphasizes making operational improvements in companies it acquires. The firm has long had an interest in multilocation service businesses, they said, as evidenced by investments including Kinko’s and ServiceMaster. The Carlyle Group is one of the biggest private equity firms and says it has demonstrated expertise in the automotive and transportation sectors. Its investments include Dunkin’ Brands, AMC Entertainment, Inc., and Grand Vehicle Works...
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...Hertz Ipo Case Analysis Executive Summary Hertz group had initiated an IPO in July 2006 when Carlyle group, together with Clayton, Dubilier &Rice, and Merril Lynch Global Private equity , three prominent firms had filed to take the firm public. However this action has come just seven months after the three had combined to purchase Hertz from Ford Motor Company for Approx. $15 million. Berg, MD of Vandelay Capital Management debated whether to invest in this IPO.The LBO sponsors had borrowed an additional $1 billion on top of the buyout financing to pay themselves a special dividend in June 2006 , being the biggest reason why the IPO generated widespread criticism along with the speed with which the IPO was conducted . In the face of this criticism, the demand for the Hertz IPO weakened, and the offer price was reduced from the initial file price range of $16-$18 to just $15. Berg must assess whether at $15 per share, Hertz offers an attractive investment for this fund. After detailed analysis on the sponsors' returns on their investment and the attractiveness of the $15 offer price to public shareholders, along with the circumstances surrounding the IPO, it was concluded and advised not to invest. Reasons behind the IPO One of the obvious reasons behind the IPO was Hertz’s strong brand equity that gave it strong pricing power since it was ranked as the top worldwide general use car rental brand and one of the largest rental companies in the U.S and Canadian markets...
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...Leveraged Buyouts A leveraged buyout or LBO is a restructuring strategy whereby a party, typically a private equity firm, buys all of a firm’s assets in order to take the firm private. ( Hitt, Ireland & Hoskisson, p. 207) A leveraged buyout also prevents the company’s stock from being publicly traded. In 2006, HCA quickly agreed to a $21 billion leveraged buyout from several private equity firms, including Bain Capital, Kohlberg Kravis Roberts & Co., and Merrill Lynch. The deal also included the assumption of $11.7 billion in debt. All stockholders received $51 in cash and a premium of 6.5 percent of the previous day’s closing price. However, this price was below the price at which the stock traded in late 2005 and early 2006. (“HCA Agrees,” 2006) HCA is only one example of large companies being willing to go private because they are unhappy with scrutiny from investors and regulators. Once a company is acquired, there is always an option for them to go public again. There are however, some downfalls once privatized. Generally, the first step to take place is company restructuring. Restructuring may include downsizing through layoffs and/or completely eliminating entire company divisions or sections. Unfortunately, this may cause resentment from the remaining staff, and can result in negative effects from the community as a whole which can hinder the company’s economic growth and prosperity. (“Our History,” 2011) However, once all of the dust has settled and the company starts...
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...| 1. Leveraged Buyout – LBOThe acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital. | | In an LBO, there is usually a ratio of 90% debt to 10% equity. Because of this high debt/equity ratio, the bonds usually are not investment grade and are referred to as junk bonds. Leveraged buyouts have had a notorious history, especially in the 1980s when several prominent buyouts led to the eventual bankruptcy of the acquired companies. This was mainly due to the fact that the leverage ratio was nearly 100% and the interest payments were so large that the company's operating cash flows were unable to meet the obligation. One of the largest LBOs on record was the acquisition of HCA Inc. in 2006 by Kohlberg Kravis Roberts & Co. (KKR), Bain & Co., and Merrill Lynch. The three companies paid around $33 billion for the acquisition. It can be considered ironic that a company's success (in the form of assets on the balance sheet) can be used against it as collateral by a hostile company that acquires it. For this reason, some regard LBOs as an especially ruthless, predatory tactic. | 2. When you decide the capital structure of a firm, what factors...
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...Lindsey Bembry Leveraged Buyouts A leveraged buyout, LBO, is an acquisition of a company or a portion of a company with a considerable portion of loaned funds. The assets of the target company are used as collateral. Each leveraged buyout is unique in that companies have their own capital structure. The one characteristic that is common within each LBO is the use of financial leverage to complete the purchase of the target company. In order for a LBO to take place, an investor, private equity firms or financial sponsor is needed. In a typical LBO, the firm obtaining the company will finance the purchase with a mixture of debt and equity. A segment of the debt in a LBO is protected by the assets of the target company. New cash flows from the bought out business are then used to pay the debt from the buyout. Leveraged buyouts happen to companies of all sizes and in all different types of industries. However, some elements from possible target firms include; small debt loads, history of positive cash flows, a significant amount of tangible assets, the possibility of new management making improvements, and for valuation/stock price to be minimal. Debt financing is borrowing money from a source with the intent to pay back the principal plus an agreed upon interest. An advantage of debt financing is those who use it can maintain ownership. Corporate balance sheets typically use principal and interest payments as a business expense which can be deducted from income...
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...Case Study: Brazos Partners and Cheddar’s Inc. Brazos Partners is a company founded by Randall S. Fojtasek, Jeff Fronterhouse, and Patrick McGee in 1999. It is a Leverage Buyout Firm that targets companies with enterprise values between $50 and $250 million, solid management, a well-defined niche and is often close to the Brazos’ Dallas home. Location is an essential part of Brazos cooperate strategic management; according to Patrick McGee Texas is the 11th largest stand alone economy in the world and has the third largest universe of public and privately held mid-market companies in the US. In addition, it is very underserved with only a dozen LBO groups, most of which were energy specific. In 2002, Brazos was contacted by an investment banker about a deal with Cheddar’s Inc., which had years earlier failed to reach a deal with a buyout firm in New York. Initially hesitant because of the firm’s lack of knowledge in the restaurant industry, Fojtasek was intrigued during a meeting with CEO and cofounder of Cheddar’s Aubrey Good. Cheddar’s had experienced success since it opened in 1978 and was looking for a partner to help with succession plans and capital for expansion and to buyout original investors. By the time they signed the deal in April 2003, the company had grown to 42 restaurants in thirteen states. Of those, eighteen were company owned and balanced franchised. In the casual dining industry Cheddar’s had carved a unique niche. The quality and value of its food...
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...Seagate Technology Buyout - Case Study Question 1: Why is Seagate undertaking this transaction? Is it necessary to divest the Veritas shares in a separate transaction? Who are the winners and losers resulting from the transaction? Answer: Seagate Technology was badly undervalued as far asSTOCK MARKET is considered, and due to this, the company decided to go for leverage buyout option. A large stake of VERITAS Software Corporation's stocks is owned by Seagate Technology, because of which its stock price is doubled (from its original price), however, the share price of Seagate Technology hardly changed for a long time. Therefore, the reason that the attempts and efforts of senior management were useless, made them decide to engage in Leverage Buyout (LBO). As a result, Seagate went for two fold transaction, i.e. the first is to sell out all of the company's disk drive manufacturing assets including $ 765 million of cash to the acquirer “Silver Lake”. On the other hand, the most crucial thing for Seagate Technology is to take care of the large stake of VERITAS Software Corporation's stocks. Therefore, it was essential for Seagate Technology to go for a separate transaction in order to evade paying large amount of taxes. The transaction of shares among VERITAS and Seagate is taken into account as reorganization of asset, while not applying any corporate taxes. Thus, by using two-fold transaction, Seagate Technology became able to liquidate its undervalued shares...
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...The Hertz buyout is one of the largest private equity deals. It drew criticism in the media and from union members, after the company’s new owners paid themselves $1.3 billion in dividends not long after the transaction closed and ultimately financed the payments by selling stock to the public. The company has realized hundreds of millions of dollars in improved financial results annually, but also has cut thousands of jobs as it has sought to make operations more efficient. Background: Hertz says it is the world’s largest general use car rental company, with approximately 8,100 locations in about 145 countries. Hertz also operates an equipment rental company with about 380 locations worldwide, although car rentals accounted for 80 percent of 2007 revenues. Ford Motor Co. had purchased an ownership stake in Hertz in 1987 and purchased the company outright in 1994. CD&R executives said that the firm emphasizes making operational improvements in companies it acquires. The firm has long had an interest in multilocation service businesses, they said, as evidenced by investments including Kinko’s and ServiceMaster. The Carlyle Group is one of the biggest private equity firms and says it has demonstrated expertise in the automotive and transportation sectors. Its investments include Dunkin’ Brands, AMC Entertainment, Inc., and Grand Vehicle Works, which provides products and services to truck fleets and recreational vehicle users. Merrill Lynch Global Private Equity is the private...
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