Summit Partners—the FleetCor Investment Harvard Case Solution & Analysis

Summit Partners—the FleetCor Investment Case Solution

The weighted average cost of capital (WACC) is 6.69%, calculated including the cost of debt and equity. Firms WACC has increased because of the increased beta, the increase WACC donates the increase in risk and decrease in valuation. Because when the expected return on an investment is assume to be volatile, to make the risker investment attractive higher returns are offered by the firms.

It is important for companies to calculate WACC to gauge the expense required to fund its future project. It if the company’s WACC is lower that means the company can finance more fund at a cheaper rate. It helps company to decide whether to increase or decrease the portion of debt and equity in order to decrease the weighted average cost of capital, to finance funds at lower rates.

Exhibit (6) in the case provides evaluation of the company’s performance in competition to its competitors as provided in the case, FleetCor technologies were compared with its comparable companies to identify the current performance and to unfold the potential of the company has in the market and how competitively the company is performing, compared to its competitors.

The difference in the current year net revenue earned by FleetCorp and its competitors is very significant.  So is the enterprise value of the company. But it can be seen that the earning per share of FleetCorp is higher than its competitors, which shows that the company is capable of generating sufficient dividends for its investor and to fund the business for further growth. High EPS is indicating that the company is potentially a worth investment and has potential to grow and expand its business in future.

The company revenue growth is also highly compatible reflecting the growth of the company. The company’s revenue is growing at the same pace as the other leading companies in the market, representing the company’s growth potential.

The EBIT and EBITDA of FleetCor is comparatively high than the companies that are dealing in merchant card processor. It means that the company is able to generate sufficient profit from its operations. EBIT is an important measure used to by investors to compare companies operating in the similar industry having different tax and interest expense. Therefore EBIT is used to compare the companies, to identify that how efficiently the company is generating profits from its core operations as it is the true representation of the company’s performance that how capable the company is and effectively the company is utilizing its resources to generate positive outcomes from its core business operations. So after comparing the company’s performance with its competitors it can be stated that the company is performing actively in the market and is highly competitive and is providing adequate returns to its investor.

Exhibit (6) Extract and Multiple Calculation
Merchant Card Processors Equity Value Enterprise Value Revenue - 2001 E Ent Value/ Revenue Ent Value / EBITDA Ent Value / EBIT Price Earnings Ratio
Alliance Data Systems        1,714.6          1,915.7              772.0                     2.5              15.3              37.9                 43.4
Ceridian        2,986.0          3,192.4          1,182.3                     2.7              13.1              21.7                 26.7
Certegy        2,821.9          3,039.1              851.1                     3.6              15.7              20.5                 35.4
First Data Corporation      32,275.4        46,380.0          6,335.0                     7.3              19.8              27.2                 25.9
Global Payments        1,251.8          1,318.2              410.0                     3.2              13.5              18.3                 29.0
National Processing        1,452.2          1,352.8              432.0                     3.1              15.5              16.4                 26.1
Total Systems Services        5,426.3          5,359.7              650.4                     8.2              25.5              35.0                 52.4
Mean        6,846.9          8,936.8          1,519.0                     5.9              16.9              25.3                 34.1
Fleet COR Multiples
FLEET COR            207.8              267.7                53.9                     5.0              43.0              24.3                 28.3

The Multiples have been recalculated for the FLEET COR’s DATA on the Discounted Cash flow calculations that we have computed. It can be seen that FLEET COR according to the market multiples is showing a mixed result, with some of the multiples showing more than average scores of the industry and some beneath or over it. The Enterprise Value to Revenue is 5.9 times for the average industry, while Fleet COR is showing the multiple at 5 times, this is beneath the market but is near to the average which can be improved by Sales efficiency.

The Enterprise Value to EBITDA is 43 times which is higher than market average of 16.9 times, while the Ent Value to EBIT is at 24.4 which is lower than market of 25.4 times. This shows that the Depreciation and Amortization figures for FLEET COR are very high which is creating an impact on the FLEET COR’s ENT/ EBIT Figures despite having very high scores in EBITDA multiple.  The PE ratio has been used by the data provided in the case analysis and it shows below average performance, but this will be increased once the Summit Partners name will be added in the controlling equity of the organization, this will improve the market perceptibility of the organization.

According to the result calculated through the multiples and DCF Analysis, it can be seen that the purchase price of the firm is around average to the market and if applied in the right direction, FLEET COR does show the potential to increase the market share of Summit Partners.


The investment made by Summit in FleedCor seems to be a lucrative investment because of the following reasons:

  • FleetCor management team consist of high profiles experienced and knowledgeable individuals, having potential to achieve the company’s high targeted projection turned into reality.
  • The acquisition of seven super license, planned by the company has been partially settled and will soon turn out to be a great deal for the beginning of the investment.
  • Base on the evaluation of the data in summits projection, the company is reflecting positive numbers, indicating it as a successful investment.
  • The company’s EPS is more that most of its competitors, indicating that the company has the potential to grow and is capable of providing its investor sufficient dividend on their investment.
  • It is also recommended that the company should not opt for all of the seven licensees immediately and should only acquire the licensees that are effectively operating.
  • The company net present value calculated is more that the cost of the investment and the company projected sales are also expected to increase, showing increasing profit margins over the years. Therefore investing in FleetCor seems to be good opportunity that will be highly beneficial and will generate good returns in near future.


After analyzing the company both qualitatively and quantitatively it can be concluded that the investment in FleetCor seems to be a lucrative investment. As the company is being run under the experienced executives, possessing the all the necessary potentials. The decision made by the company of acquiring the super licensees will benefit both the parties and will turn out to be a successful investment yielding high returns, and Summit Partners will be in a confident position after the investment in FLEET COR............


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