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Private Equity Cases

Aramark: LBO at a Crossroads

How should a newly hired CEO lead his company’s transition to the next phase of ownership and capital structure five years after the execution of a leveraged buyout?
Margaret Cannella, Ellen Carr

The first consideration of private equity ownership is achieving milestones to exit from the investment. Aramark, a classic leveraged buy-out company, has been private for many years. In that timeframe, the owners have considered a few alternatives including an initial public ownership to monetize their shares. This case asks students to consider and recommend among those alternatives.

Case id: 130307/ Supplemental Material: Teaching Slides, Excel Spreadsheets

Caesars Entertainment Corporation

Is an LBO deal for a highly levered diversified gaming company worth the risk?
Margaret Cannella, Sumit Sharma

The case puts the student in the shoes of a newly minted MBA who is employed as a credit analyst at a hedge fund. She is asked by her Portfolio Manager to consider an investment in the bank debt or bonds of Caesar's Entertainment Corporation. Because the analysis is complex, the case includes a series of supplementary exercises designed to help students with a step-by-step analysis to the investment considerations the credit analyst needs to include in her recommendation. In addition, there are extensive teaching notes for both the supplementary exercises and for the case answers themselves as well as a detailed glossary of terms.

Case id: 120305/ Supplemental Material: Teaching Note, Excel Spreadsheets

Bright Horizons Family Solutions, Inc.: A Great Deal, or Room for Improvement in a Bid by a Strategic Acquiror

As an investment bank prepares to advise a client on a competing bid for a child-care services company, how should the target and potential buyer be valued?
Donna M. Hitscherich

Jacqueline Barbieri, the managing principal of boutique investment bank B&H Advisors, wanted to assist her client Living, Loving & Learning on a competing bid for Bright Horizons Family Solutions, which had agreed to be bought by an affiliate of Bain Capital. Although both LL&L and Bright Horizons provided child-care services, the former was closely held and few trading comparables existed for Bright Horizons. Creating a stock-for-stock merger proposal depended on analyzing the valuations for LL&L and Bright Horizons and incorporating the impact of a $19.5 million termination fee. In this case students examine financial data such as projected income statements to create valuations for both businesses and examine the options for a takeover bid.

J.Crew Group, Inc. The Second Time Around or Another Holiday Shopper?

Should an event-driven merger arbitrage fund act on the early positive outcome of a recently announced buy-out deal for J.Crew?
Donna M. Hitscherich

In late December 2010, the chief investment officer at Cavalier Capital Event Funds, an event-driven merger arbitrage fund, learns of a $3.0 billion buyout of J.Crew at $43.50 per share by TPG Capital and Leonard Green & Partners, L.P. On the first day of trading following the announcement, J.Crew stock closes above the buyout price, at $43.99. In this case, students are asked to take the perspective of this CIO as he analyzes various aspects of J.Crew’s capital structure while preparing a discounted cash flow analysis in order to determine whether Cavalier should now take a stake in the company.

Under Armour Protect this IPO or Sale to Strategic Bidder?

Should Nike make a strategic bid for Under Armour in an effort to derail a planned IPO?
Donna M. Hitscherich

Under Armour, the fast growing maker of performance sports apparel, announced its intention to sell stock to the public in an initial public offering. P. Preston Barbieri, a managing director and head of the retail and consumer products group for the boutique investment bank, Shadbush Securities LLC, must assess whether it makes sense to approach Nike, a maker of sports apparel, to discuss making a strategic bid for Under Armour at a valuation compelling enough to convince the board of directors of Under Armour to derail the initial public offering. In this case students are provided with an array of financials and asked to value both Under Armour and Nike.

Case id: 100311

1-800 CONTACTS: Transitioning from Public Company to Private Equity to Strategic Exit

Marshall Sonenshine

In 2006, 1-800 CONTACTS Founder / CEO Jonathan Coon and the company’s board decided to return to private as opposed to public status. In 2007, the private equity firm Fenway Partners bid 20% above the second highest bid—then successfully exited in 2012 in a sale to WellPoint, the largest of the Blue Cross / Blue Shield insurance companies. What led to these major corporate transactions and how did the company and its strategic partners achieve their stated goals?

Case id: 140304

Makalani: Growing a South African Mezzanine Fund

What are the growth options for a South African mezzanine fund operating within the country's framework of incentives for black-owned businesses?
Paul E. Tierney, Jr.

The Jerome Chazen Case Series: Within two years of its debut, the South African mezzanine fund Makalani had financed 21 transactions in accordance with South Africa's Black Economic Empowerment policies, which provided incentives for equity interest sales to black owners, and was listed on the Johannesburg Stock Exchange. Now its chief executive, Vusi Mahlangu, was pondering the fund's future. With competition growing for BEE deals and new funds entering the mezzanine market, Mahlangu is considering whether Makalani should seek growth in the fund's current space, whether to branch into private equity or even expand beyond the empowerment financing area. In this case students consider Makalani's strategic choices after examining South Africa's empowerment policies, Makalani's performance metrics and investments and the structure of one of its BEE transactions.

Case id: 090417

Petersen Publishing (A and B)

Facing skepticism that it overpaid for a magazine publisher, will a young private equity firm find a profitable exit strategy?
Jonathan A. Knee
Case A of this two-part case takes place in the fall of 1996, when Avy Stein was conflicted about his young private equity fund’s purchase of magazine publisher Petersen Publishing. While the deal had established his $343 million fund, he feared his firm had fallen victim to the “winner’s curse” by outbidding other suitors. Stein had convinced his backers that the firm’s reported EBITDA understated its profitability. Yet given that none of Petersen’s other suitors aggressively bid for the publisher in 1996, Stein was concerned about an exit strategy for the investment and the ability to drum up interest from those same suitors in the future. In this case students consider Stein’s options after reviewing Peterson’s financials, other LBO deals and competitive data from the magazine industry. Case B follows up on Petersen’s situation five years later. Stein’s company has now made ten times its money back and Petersen, again up for sale, is purchased by special interest publishing company Primedia.

Case id: 080320

Sedona: The End of a PIPE Dream

Sedona Corporation: How did a PIPE transaction prove almost fatal for an Internet company?
Lawrence R. Glosten

In 2000, Sedona Corporation, a provider of Internet-based customer relationship management tools, was in financial distress. Unable to approach traditional capital markets, it raised $2.5 million by issuing a floating rate convertible preferred security to Rhino Advisors, a private investment fund. This move almost brought Sedona’s business to an end. Through an analysis of the Sedona deal and its aftermath, this case teaches students about the circumstances and processes of a prototypical private investment in public equity, or PIPE transaction.

Case id: 110311

New Research

No Free Shop: Why Target Companies in MBOs and Private Equity Transactions Sometimes Choose Not to Buy ‘Go Shop’ Options

By Charles W. Calomiris, Donna M. Hitscherich and Adonis Antoniades

Read the Paper >