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Leverage buyout -- TPG buys Ducati: pros and cons of the deal on both sides.

See attached files.

Mergers & Acquisitions --- the case is about a leverage buyout of Ducati (motorcycles) by Texas Pacific Group (a private equity firm).

Attached is:

1) scanned copy of the text of the case
2) plus a scanned copy of: a summary of TPG + several financial statements on Ducati

Questions:

1) From Ducati's perspective: what are the pluses (pros) and minuses (cons) of the deal? Explain.
2) From Texas Pacific Group's perspective: what are the pluses (pros) and minuses (cons) of the deal? Explain.

Attachments

Solution Preview

Questions:

1) From Ducati's perspective: what are the pluses (pros) and minuses (cons) of the deal? Explain. (solution is after Q.2)

Answer:

Ducati is a worldwide leader in street bikes. It is one of the top racing brands in Italy. It has a considerable growth potential in its core business. It has a 5% global share & is consistently increasing. The deal would involve several issues & Ducati must look for the best offer. The pros & Cons are under mentioned:

PLUSES

1) If Buy-Out takes place successfully, then the Ducati Company would work under the supervision of Texas group .Thus, Ducati would function in a healthy environment & would enjoy managerial expertise of Texas group.

2) The shareholders of Ducati would be paid a handsome amount & premium in lieu of their shares.

3) Ducati would be able to increase its efficiency & would ensure optimum utilization of resources while working under Texas group.

4) Although Ducati is a great brand but it has never been able to create a global impact. It badly needs support of a giant who could establish the brand globally & could manage deals in a professional & systematic manner. If deal is done, Texas could prove very effective regarding this issue.

5) Ducati is having severe financing bottlenecks. There is lot of mismanagement. Its working capital needs are not estimated correctly & there are delays in payments and collection as well. The experienced entrepreneurs of TEXAS & their expert managerial skills may give a rebirth to Ducati.

6) Ducati would experience a rapid growth & would be able to generate high returns if deal is done.

7) Ducati is heavily entangled with Cagiva, due to which its actual performance is not known. Also its ...

Solution Summary

In an 1100 word solution, the response is carefully detailed for both companies to the transaction. There are from five to eight points for each company for pro and con.

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