Case: Bidding for Hertz: Leveraged buyout Harvard Case Solution & Analysis

Case: Bidding for Hertz: Leveraged buyout Case Solution 

How does the dual track process used by the Ford to initiate “consideration of strategic alternative” affect the bidding process for hertz?

The new dual –track process used by the Ford Company to initiate the reflection for strategic alternative” affects the biding procedure for Hertz by providing the company another plan to hit if other viable sale opportunities fall through. Ford’s strategy would give Hertz other options to get back necessary capital, therefore dropping the quantity of risk.

This plan would then give company a base bid that would be either equivalent to or more than the amount of what might be in theory obtained from an IPO.  The new plan makes the bidding process more difficult for the company because the company has to gathered more information and data to execute that process or strategy.

Although this new strategy provides the acceptable price but the cost for the group is higher and ford will get the reasonable value for its shareholders. Longer time to collect the required level of information reduce the group’s competitive advantage as the company get the information will be revealed to its competitors.

The hertz company has a good position in financial term as the company free cash flow are worthy and the revenue from car and equipment rental is also great for the intended acquirer. The hertz company is the ideal target for management or leveraged buyout as the company’s financial performance is quite reasonable.

The group has to enhance it operational activities by improving efficiencies in processes. However the company has good free cash flows and future prospects but the company has higher debt levels which increases the financial risk of the company as ell as credit risk. The group has to reduce the debt levels of the company by not providing dividend for some year and better investment policies.

 The two segment business provides the large opportunities for operational improvements which lead to identification of bottleneck in the process and address of those limiting factors. The main characteristic of the dual process track is running the two tracks at the same tine will produce better synergistic benefits but it is more costly and the management of the company has to provide more efforts as compare to simple sale or IPO process.

 The company cannot easily exist from the traditional IPO process. These type of process will might become in third track process as it include the yield of bond at the end of process. The coordination of two tracks is difficult which leads to less effective IPO market window. The benefits involve in the process is that the owner companies can easily hedge their bets and left the exits decision.

The certainty of transaction will increases as compare to other options. The process will increase the exit proceeds or return for the owner as the process involves more competitors for Merger and acquisition sale. The company can switch one process to another which suits the best for the company.

As the process is huge time consuming the company has to initiate at proper timing as it includes the documentation process as well as practitioner or lawyer hours for effective process. The company has to create better relationship with the third parties as the process involves the adviser and bankers for better execution.

The proper disclosure should be provided by the company to the intended investors about the process so the public confidence or the company has been maintained for the longer term. The new dual track process will leads to mitigation in market volatility as the sudden change in market condition leads to negative impacts on the IPO process in past. The new process will add value to the company’s shareholders....................

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