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Case questions: Bidding for Hertz
How does the dual-track process used by Ford to initiate “consideration of strategic alternatives” affect the bidding process for Hertz?
The dual-track process used by Ford to initiate “consideration of strategic alternatives” affects the bidding process for Hertz by giving Hertz another plan of attack if other viable sale opportunities fall through. By obtaining an IPO price as a base for the value of the company, Ford’s strategy would give Hertz other options to retrieve necessary capital, thus reducing the amount of risk. This strategy would then give Hertz a base bid that would be either equal to or above the amount of what could be theoretically obtained from an IPO.

In what way does Hertz conform or not conform to the definition of an “ideal LBO target”? Do you believe Hertz is an appropriate buyout target

One way that Hertz conforms to be an “ideal LBO candidate” is the proven financial performance and pretax profit the company has generated since 1967. In addition, from 1985 to 2005, revenues had grown at a compound annual growth rate of 7.6%. Another characteristic that Hertz possesses as an ideal LBO candidate is their management team. Having a substantial amount of industry knowledge within a management team is a key component in ascertaining a company. Also, if need be an experienced manager (George Tamke) could replace the current CEO (Craig Koch) and restructure a new compensation structure based on newly developed incentive plans that targets cash flow and capital usage metrics. Based on these characteristics (as well as others) we believe that Hertz does have an attractive record and does qualify as an appropriate buyout

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