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Case Studies by Dickson L. Louie

2 case studies

by Publication Date
published: 23 Apr 2018

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Abstract:
Private equity firm Clayton, Dubilier & Rice (CD&R) is preparing a bid for leading US car rental agency Hertz. By replacing Hertz’s top managers, improving capital management and driving down operating costs, CD&R sees an opportunity to nearly double EBITDA. However, the turnaround involves significant risks, which CD&R must weigh in preparing its bidding strategy. Students are required to assess and value the business, evaluate a post-acquisition operating turnaround plan requiring new leadership, select a financial structure to mitigate significant cyclicality, and craft a winning bidding strategy in the context of a competitive auction.

Pedagogical Objectives:
This case underscores the importance of creating a differentiated investment thesis (no matter how slight the advantage) in a competitive auction setting, inviting students to develop and support their own investment thesis. It demonstrates how the operating capabilities of PE firms (like CD&R) translate into a valuation exercise, investment thesis and operating plan. It explores how the firm’s strategic bent shapes its bidding strategy and willingness to pay for a business that has the prospect of achieving high returns for its fund, as well as identifying sources of advantage in deal sourcing, expertise partnering and turnaround management in the private equity domain.

Keywords:
Private Equity, Winner’s Curse, Auction, Turnaround, Bidding, Rental Car, Investment Strategy, Investment Thesis, Due Diligence, Hertz, Ford, Valuation, Synergies, Operating Efficiency

published: 20 Dec 2013

  • Topic: Entrepreneurship
  • Industry: Prepackaged Software
  • Region: Global

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Abstract:
In mid-2011, Steven Birdsall, then a 46-year old senior vice president at SAP, revives and scales up a neglected line of packaged software called Rapid Deployment Solutions (RDS), within the global $20 billion software giant. Challenged by his annual evaluation to transition to a more strategic leader, motivated by a passion to build new businesses, and seeing a growing customer demand for less costly packaged software due to advances in cloud and mobile computing, Birdsall has the idea to create RDS as a standalone business within SAP. Despite internal resistance from SAP's account executives, partners and consultants, Birdsall succeeds in making RDS a $1 billion business in 2012, largely due to his ability to convince them - and customers - of its economic and market potential. His personal networks within the company play a critical role in gaining support and scaling up RDS globally.

Pedagogical Objectives:
This cases focuses on how leaders can develop a new business in a large company. Key teaching points: - how to work the organization to gain support for a new business - how leaders influence others to buy into a business vision

Keywords:
Corporate Entrepreneurship, Leadership, Career Change, Personal Networks, Sales Management, Software Industry, Sap Ag, Prepackaged Software

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