Scribd
Upload
115 views1 page

Characteristics That Make Hertz An Ideal Candidate For LBO

Hertz is an ideal candidate for a leveraged buyout (LBO) for several reasons: 1) It has a strong market share and experienced management team in the car rental industry. 2) It has strong and predictable operating cash flows with a history of stable revenues and expected growth. 3) Ford, the current owner, is motivated to divest this non-core subsidiary.

Uploaded by

Seema
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
115 views1 page

Characteristics That Make Hertz An Ideal Candidate For LBO

Hertz is an ideal candidate for a leveraged buyout (LBO) for several reasons: 1) It has a strong market share and experienced management team in the car rental industry. 2) It has strong and predictable operating cash flows with a history of stable revenues and expected growth. 3) Ford, the current owner, is motivated to divest this non-core subsidiary.

Uploaded by

Seema
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Bidding for Hertz: Leveraged Buyout

Submitted by: Group-1

Characteristics that make Hertz an Ideal Candidate for LBO


 Market Share: In terms of car rentals, undoubtedly Hertz was the market leader and
it had the enough expertise in the business.
 Strong Management Team
 Hertz management team had loads of industry experience and certainly was strong in
terms of their management style and philosophy. However, Ford had never expected
the Hertz management to increase their performance and productivity. Nevertheless,
at the current moment, Ford should realize that for this LBO to be attractive it has to
force or probe the Hertz management to perform better.
 Strong and Predictable Operating Cash Flows
Historically, Hertz financial performance in terms of OCF has been superb. Hertz was
a market leader with diversified operation all over the world. 34% of revenues were
coming outside of US. Revenues in both the rent a car and equipment market were
stable and had experienced growth in the last couple of years and are expected to
grow steadily. Equipment market was a little shallow; however, this trend was about
to diminish with time.
 4: Seller is Motivated to Cash out of his/her Investment or Divest Non-core
Subsidiaries
 In the case of hertz, Ford was surely motivated to sell it and divest this part of the
business.
 5: Strong Tangible Asset Coverage, Heavy Asset Base, Divestiture Assets
 Hertz had a very strong asset base both in rent a car and equipment business. On a
consolidated basis, Hertz tangible assets were almost 76% of overall assets. Also, the
assets of the two units were very separate in the mode of business and revenue
generation.
 6: An Exit Strategy
 The company should approve different modes to resell the company in order to create
an attractive exit strategy for the buyer.
Considering the above mentioned factors, the company would be a feasible LBO
target on condition of enhanced performance on the part of management to generate
boosted revenues.
 The dual track process assumes the fact that ford will be able to avail IPO facility if
the LBO options are not viable. First of all this process will lead to a reduction in the
risk of Ford as it will have a dual option in terms of share offering. Secondly, it will
lead to a possible increase in the price of LBO because of competitive pressure
pressed by the IPO. Thirdly, it can provide Ford with negotiation leverage. Most
importantly, apart from all these factors, this process will provide Ford with a true and
fair value of their selling company owing to the ‘due diligence’ factor of the bidders.

You might also like