Private Equity Excel Assignment 2

Assignment 2 FIN Due by WEDNESDAY 8/10/22 @ 11:59 pm. NO EXTENSIONS

All assignments should be written in your own words and provide examples and opinions beyond the textbook or any other source you get them from as listed in the online assignment guidelines. This is an individual assignment. For calculations show ALL your steps including calculator/Excel keystrokes and/or formulas.  It is important for full credit to explain and briefly discuss your final answers and NOT just provide a number answer only or textbook definitions or any other supplements. USE YOUR OWN WORDS. Plagiarism software will be used to compare to those and to each other. Please label your uploaded assignment file with the course and your name on the file to the online assignment link. It is important to show you work for partial credit. Remember to show all work including calculator keystrokes if using excel submit the original excel file. Also, include a brief discussion of your results using your OWN examples and opinions where applicable.

NAME: ___________________________________________________

Complete Questions 1,2 and 3.

---------------------------------------------------------------------------------------------------------------

1. (30% REQUIRED)

Two friends Harley and Davidson agree on a company deal with an implied enterprise value of $5M. Harley invests $3M. The deal is structured as all-common, and American Private Equity comes in and offers $8.5M million for the company. Harley owns 60% and Davidson owns 40%.

a. Set up the All-Common structure for the two partners. Calculate the payout table and discuss

b. If the deal is structured as redeemable preferred with $1,000 cheap common for the two partners, calculate the payout table and discuss

c. The deal is Convertible Preferred for the two partners. Calculate the payout table and discuss

d. What is the importance of capital structure ownership in private equity.

2. (35%) CASE STUDY: Hertz LBO. The Case is Posted Online. Complete the following:

a. How realistic are the key assumptions that underlay the Bidding Group's projections in case Exhibits 8, 9, and 10? Which assumptions are most likely to have the largest impact on returns? Look at the pro forma, are these assumptions realistic, such as travel increase in price and vehicles, recession at the time and any others. Briefly discuss the status of Hertz company in today’s economy.

b. Based on the base-case estimates in case Exhibits 8, 9, and 10 and your estimate(s) of terminal value if the sponsors put up $2.3 billion in equity, what return can they expect to earn? Calculate the IRR. Discuss your results.

c. Calculate the Interest Coverage Ratio and Leverage Ratio and discuss its importance in the LBO.

d. What do you conclude about this buyout and why? What is one success and one failure about this LBO in your opinion and why.

e. Using this case briefly discuss the 5 steps used in the LBO process that would be important to Hertz. Use your OWN words not the textbooks. (Rosenbaum Chapter 5)

AND

3. (35%) Case Study: Using the Panera Bread case discuss the following questions:

a. Elaborate on Panera’s business model in the case and your thoughts. Also, add a little as to where the company is today.

b. What are the merits and risks of the transaction in the case?

c. Discuss the capital structure and if was efficient and why?

d. What are the key drivers of growth for Panera and why?

e. Discuss the use and importance of a Leverage Buyout (LBO), which is an acquisition of a company or parts of one using a high level of debt. Provide one pro and one con relating to this case.