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Bidding for Hertz Lbo

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Bidding on Hertz LBO case study

The main issue of the case is that The Carlyle Group and its partners (Clayton, Dubilier & Rice, and Merrill Lynch Global Private Equity) must make a decision about the final terms of a bid to purchase the Hertz Corporation, a wholly owned subsidiary of The Ford Motor Company. Hertz had been put up for sale in June 2005. In order to initiate “consideration of strategic alternatives” Ford entered a dual-track process, which means pursuing an initial public offering and a private auction process simultaneously. A dual-track process gives several advantages to a Ford, a seller of Hertz, by affecting the bidding process: 1) a dual-track approach can maximize the price obtained by the seller because of competitive pressure of a viable IPO process that can drive bidders to put more money on the table; 2) a dual-track process can give a seller significant negotiating leverage over deal terms in a private sale; 3) a dual-track approach allows a seller to keep its options open until it becomes clear which route will yield the highest value, thus preserving flexibility and hedging against deal uncertainty; 4) while a dual-track approach magnifies the cost, complexity and management distraction inherent in any sale process, it may also enjoy useful synergies by providing to a seller a comparable information about value of the selling company. The seller can judge about fair ask price of its company based on due diligence of bidders. The Bidding Group prepared detailed pro forma projections for the transaction that allow the consultant to examine the synergies of the deal, estimate a value and determine if the Hertz is ideal LBO target. The Bidding Group should consider certain qualities that make a potential LBO candidate an ideal target. These include following characteristics: • Strong,...

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