Summit Partners—the FleetCor Investment Harvard Case Solution & Analysis

Introduction

Summit partners identify an opportunity of investing $44.9 million in FleetCor, operating a closed loop card processing system. It provides information and payment processing service to business fleets and mobile workforces ranging between 10-1000 units of a fleet.The company provides facility of proprietary card purchasing service to the government and corporate fleet operators. The card provided by FleetCor allows the card holder to avail discounts on fuel and maintenance at various merchant sites and the manager at fleet hold all the information reports regarding the purchase activity of their cardholder. The majority of the company is owned by outside investors, GCC and Advantage Capital. The company was in major problems and was near bankruptcy, this was abated after appointing Ron Clarke as the new CEO of the company; whocompletely turnaround the company into a successful business. The company has now expanded its reach in 31 different markets throughout the U.S. The company to expand is planning to acquire seven of its largest licensees and for it sufficient amount of funds are required. Therefore the company was looking for a potential investor to invest in their business and Summit after competing with various large private equity firms was selected by Fleet to work with them,and Summit was considering to make an investment of $45 million in exchange of 46% ownership.

Summit Partners—the FleetCor Investment Harvard Case Solution & Analysis

The partners Evan and Caroll had prepared the partner package as theyhad to provide all the required data to the remaining partners containing the relevant background information regarding the investment made in FleetCor. In order to accept the deal a number of questions were asked by the partners through subsequent due diligence. Therefore, the remaining due diligence is a priorities need to be address, in order to better anticipate the question likely to be asked by the partners.

Problem Statement

Summit partners has been selected by FleetCorp as an investment partner andagreed to give 46% of ownership in exchange of $45 million. The problem statement analyzes on the fact that, is the FleetCor a Valid investment for Summit Partners, and will they be able to receive a return on their investment which will suit the needs of Summit Partners organization.

Summit’s Investment Terms

Investment deal between the companies:

Summit partner proposed an investment of $46m in exchange of 46% ownership to FleetCorp. The investment in the company will be in the form of preferred stock with an 8% of accrued interest that will be compounded on an annual basis. The investment made by Summit will be considered as an equal-footing inliquidation.

Investment allocation:

The fund to be received by the summit partners will be utilized as follows:

  • Out of $46 million, $9 million will be used to redeem a subordinated debt of $15 million that is being held by the current investors and the remaining $6 million of the debt will be converted into the preferred stock.
  • $16.6 million will be used as an upfront cash in order to acquire the FleetCor 7 super licensees.
  • The remaining amount of the investment will be used by the FleetCorp as a general working capital workingto finance the growing business and to acquire any other potential licensees.....................

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