Proposed acquisition of William Carter Corporation Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction:

Berkshire Partnership is a Boston based private equity firm that is under a proposed acquisition plan by William Carter Company. William Carter is operating under apparel industry for infant, baby and children. Berkshire has a better experience for its investments in the manufacturing and retailing sector, therefore there are high chances that it will win the bid for William Carter and can operate it in profitable in the years after acquisition.

Carter has a great market reputation and it had developed up to the extent it has required from the company. It has a history of strong performance for 136 years of good working and the key to their good performance is the management team of Carter. It has equity capital of around $1.7 billion and it has successfully completed 70 acquisitions. The motive for growth of the company was to go for acquisition rather than going for a new setup therefore it expanded drastically.

Berkshire has appointed five members to investigate this LBO. The team has less than eight weeks to investigate and come up with a solution that is priced of William Carter. This requires initial research, due diligence and bid strategy to acquire the company. Goldman Sachs (GS) will help to have successfully bid for William Cartel and it will offer a step-on financing. The bid winner will have an option to finance the bid through a packaged capital structure that will be proposed by GS.

Carter has started its business in 1985 in Needham, Massachusetts. The company is highly competitive since its incorporation and it has now become the largest branded manufacturer for toddler and baby apparel industry in The United States. It is operating under five divisions; layette for newborn baby, baby sleepwear, baby Playwear, young children’s sleepwear and young children’s Playwear. It offers a variety for the children and young children, therefore it is expanding because of the range of its products. It manufactures clothing from birth to age 6 that, can we say “from birth to bus”.

The company was under struggle to grow in 1990’s at the time it introduced some of the loss making product lines that has proved to be a loss of time and money for it. Its products like swimwear, underwear, zipper, cut bows and many more products had proved to be the reason for struggle for it. The company got bad reviews for those products due to lack of expertise in these product lines.

The company used to have less innovation because it used to proceed in the next season with 67% of its old designs and only 33% of the new designed were introduced in every season. In spite of such a lack of innovation it survived in the industry and became the market leader in the children’s clothing.

In 1996 Carter was acquired in a leverage buyout by Investcorp, a Bahrain based company that had also an investment in Gucci group and Tiffany & Co. After the LBO, it has also continued operations to profitability. It introduced a new product named Tykes at the start of 2000. It was aimed at discount channel for two discontinued brands named carter’s and carter’s classic. Investcorp is looking for to sell the company and come up with their stake back from Carter; therefore it has invited many of the proposed acquirers to come up with a bid price.

Proposed acquisition of William Carter Corporation Case Solution

Problem statement:

The problem is that what should be the bid price for William Carter by Berkshire Partnership and whether the price can result in the success of the bid for Carter. If it gets the bid successful then whether it should go to step-on financing that is offered by Goldman Sachs (GS) or not. If it goes with step-on financing then what amount it should go for financing packages and whether it is acceptable by the shareholders of Berkshire or not. The appropriate valuation model must be chosen as there are uncertainties for the future operations of Carter. Whether Berkshire is efficient enough to make the organizations profitable and if are there reasonable basis to believe that the cash can flow to the entity according to management forecast. Is there any other valuation model that is suitable for the valuation of the company except for free cash flow model? There are many apparel buyer companies who will bid, therefore there are high chances that they can have a successful bid due to synergy impact...........

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