The financial structure options and the diligence approach
Private Equity Achieves Returns through Operating Improvements:
|
Purchased for use on the MSc Finance & Management,
Cranfield, at Cranfield University. Taught by Benoit Chevalier-Roignant, from 15-May-2020 to 15-Nov-2020. Order ref F383299. Usage permitted only within these parameters otherwise contact info@thecasecentre.org |
|
---|---|---|
![]() |
Copyright © 2018 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION.NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, TRANSLATED, REPRODUCED OR DISTRIBUTED IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.
218-0024-1 |
---|
say that that they took us seriously at all might be an overstatement.”
David Wasserman, Clayton, Dubilier & Rice
Copyright © INSEAD 1
218-0024-1 |
---|
1 | 2 | |
---|---|---|
2 | ||
3 |
|
|
Copyright © INSEAD |
|
||
---|---|---|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
218-0024-1 |
---|
13 14 15 16 17 |
---|
218-0024-1 |
---|
Insurance Replacement: This category—an offshoot of off-airport locations—included consumers who were referred by, or whose rental costs were reimbursed by, insurance companies because their cars had been damaged. Auto rental companies often established agreements with insurers to cover billing and payment arrangements.23 In 2004, US revenues were estimated to be $5 billion.24
Hertz’s Competitive Position
218-0024-1 |
---|
30 |
|
6 |
---|---|---|
31 | ||
32 | ||
Planning the Investment Committee Meeting
To structure the initial investment committee discussion, Wasserman would have to provide a high-level evaluation of opportunities for operational improvements, a draft investment thesis identifying key issues for due diligence, a recommendation on whether to pursue an aggressive financing structure, and a plan to give the company an edge in the auction process. He would call on the operating partners for insight as to what was required to pull this off operationally and address the crucial question of the underperforming leadership team.
|
||
---|---|---|
|
||
|
||
|
||
|
||
|
||
incentives, an annual reduction of $275- $350 million in capital deployed seemed possible. |
Copyright © INSEAD 7
|
||
---|---|---|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Copyright © INSEAD 8
|
||
---|---|---|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
5. Planning the due diligence approach
With bids due in three months’ time, the partners would need to focus due diligence on a few key areas. Wasserman expected them to push him to identify the most critical aspects of his investment thesis. They would require absolute clarity in these areas for CD&R to bid confidently. He needed to determine what these areas were.
leading consultant in the car rental space, and Deutsche Bank and Lehman Brothers led the
ABS financing sector. Wasserman wondered if CD&R should look to partner with these
|
|||
---|---|---|---|
|
|||
|
|||
|
|||
|
|||
|
10 |
2005E |
---|
Revenue
Source: CD&R
218-0024-1 |
---|
|
|
||
---|---|---|---|
*Refers to one-off CapEx savings, not EBITDA savings | |||
Exhibit 3 | |||
Hertz Balance Sheet | |||
Cash, equivalents and short-term investments | |||
Notes payable, including commercial paper | |||
Interim credit facility (1) |
|
||
Holdings note (2) |
|
||
Senior notes | |||
Asset-backed securities | 600.0 | ||
Foreign subsidiaries debt | |||
Total debt, including current portion | |||
Total stockholder’s equity | |||
Total capitalization |
|
218-0024-1 |
---|
Options for Fleet Financing
could be recalled and reissued as
fleet needs demandedand liquid historically, but Hertz’s contemplated issues were larger
218-0024-1 |
---|
In preparation for our Monday morning discussion on Hertz, Jack Walsh, senior operating partner at CD&R and the former chairman and CEO of Great Enterprise, has prepared the attached letter summarizing his opposition to the deal. As you all know, Jack has provided CD&R with great business insight on many past deals -- those that we have consummated and those that we have walked away from.
Jack has asked me to share his memo with all the partners prior to our Monday meeting.
218-0024-1 |
---|
Exhibit 6
Letter from CD&R Investment Committee Member Jack Walsh to CD&R Partners
218-0024-1 |
|
||
---|---|---|---|
16 |