Ducati & TPG – A " Wild Ride” LBO

Case Study

December, 2010

Q1. The size of the opportunity plus the question of brand name expansion 1 . 1 The problem of the focus on firm

Advantages: (1) The Ducati manufacturer was world famous; (2) The merchandise was wonderful in terms of technology and top quality and it had won the 1990, 1991, 1992, 1994, and 95 World Superbike championships against strong competition; (3) Ducati's product relatives was wide offering 15 models in four family members based on several different engines; (4) The company acquired strong developing fundamentals with low set cost and high level of standardization of its search engines. Negatives: (1) Ducati experienced severe financing problems, so that it had to hold off payments to many key suppliers which led to unfinished items. This in turn triggered lower product sales and extended customer hang on lists; (2) The administration was awful with its business entangled with Cagiva; (3) The financial performance has not been at all clear. 1 . two The nature of the deal. It is the takeover of a desperately managed and financially affected motorcycle make firm who may be strong in brand and manufacturing principles. The objective is to use TPG's mastery in management as well as financing support to improve the target's organization situation. 1 ) 3 The manufacturer is expandable or not really

We judge that Ducati could broaden beyond motorcycles. To have this conclusion, we have gone through the next questions: The type of products Ducati could give? As the only business of the firm is motorcycle, bike related goods should be the mass. Two types of products happen to be suggested: (1) Clothes and motorcycle related accessories just like Gloves, shades, and head gear; (2) Physical accessories like engines and other parts. Wherever does the demand come from? Really natural that the Ducati bike fan will probably be happy to include a Ducati-styled wears. Thus clothes and accessories potential buyers should majorly come from current Ducati cycle owners. Because Ducati is known for its engine technology and strong manufacturing fundamentals, it is mechanical equipment product needs to be welcomed by simply motorcycle companies around the world. The marketing, style and division of the product: With a world famous brand currently established, campaign of new products is not so difficult. As promoting activity remains at low level, all it needs is just to generate more attempts in this component. Italy is famous for its style and style, so it's not so difficult to find a good designer to implant Ducati's style into clothes and accessories. To get distribution, Ducati could sell its new releases in existing Ducati stores. A further strategy could be done by cooperating with retailing firms to grow its garments and accessory products. Function model: Harley-Davidson: Harley's apparel and mechanised accessory items are highly successful and are the cause of about 15% of the sales. Since Ducati's circumstance is quite a lot like Harley's, Ducati will probably copy Harley's version. Q2: How exactly does the deal differ from a typical private equity finance deal in america? 2 . one particular Deal Circulation Generation: In US, private equity firms' offer flow is generated from many sources, including organization plans received, referrals via entrepreneurs or companies in which the fund has previously invested, from other funds looking to association a deal, and from experts, such as lawyers and accountancy firm, who know about the fund's investment standards. In early spring of 95, Cagiva presented apparent economical problems and approached DMG for a bridge loan, who referred a package of equity investment in Cagiva to TPG. 2 . 2 Research Process: In US, due diligence get started after the prospective potential buyers and provides recognize this deal can be mutually beneficial. In depth DD is generally carried out after a holding agreement is in place and earnest money has become provided. Research in this offer was to understand the economical conditions of Ducati, specifically its profitability. Because Ducati and Cagiva were so intertwined to...