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Hertz Case

In: Business and Management

Submitted By group9
Words 566
Pages 3
Professor Haddad
May 6, 2014
Bidding for Hertz: Leveraged Buyout This case goes over two different perspectives, which are the buyer and the seller. The company Ford is the seller, which is presented two alternatives. The purpose is to raise capital from Hertz by issuing and IPO. The second option is an LBO. The “Bidding Group”, is the buyer for the LBO, which consists of Carlyle, Clayton, Dubilier, and Rice. They are from the Merrill Lynch Global Private Equity group. The question is what should the minimum and maximum price be accepted and paid for such deals. The Minimum price that Ford should accept for Hertz is the price of the IPO, which is 13.7 billion. This calculation is based on the pro froma statements on Hertz’s historical performance and market growth rate, which is assumptions and information. On the other side the maximum price that the Bidding Group should pay for the acquiring of Hertz is 14.9 billion. This number was calculated by taking the EBITDA and using the market multiple of 8X. This numbers come from the provided Exhibits and on the forecasted pro forma statements, which consist of operating efficiencies and information.
Because Ford has two options to either sell equity, by issuing an IPO for Hertz, this is a value that cannot be ignored and should be considered significantly when making such a financial decision. For the Bidding group to make an competitive offer, it must be at minimal a little greater than the price Ford could fetch by issuing the IPO, furthermore it must be distributed in quicker manner, then receiving the funds from the IPO.
A leveraged buyout is only one of the options that Ford has available. The Bidding Group has to take into consideration several other factors, price is not the only issue. Ford has the possibility of significant gains if it released an IPO for Hertz. Ford currently has 100% owner equity

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