San Diego State University Bidding for Hertz Case Study Questions

Bidding for Hertz
1. How does the dual-track process used by Ford to initiate “considerations for strategic
alternatives affect the bidding process for Hertz?
2. In what ways does hertz conform or not conform to the definition of an “ideal LBO target”?
Do you believe Hertz is an appropriate buyout target?
3. Strategically, what value-creating opportunities can the sponsors exploit in this transaction?
4. How realistic are the key assumptions that underlie the bidding Group’s projections in case
Exhibits 8, 9, and 10? Which assumptions are most likely to have the largest impact on
returns?
5. 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?
6. If Carlyle desires a 20% target return on its equity investment, does your analysis suggest that
$2.3 billion is too much to pay, or can it afford to pay more – in either case, by how much?
7. What is the market-required rate of return for this investment, and why might this differ from
the sponsors’ target return?
8. What is the value of Hertz using the equity residual method of valuation?
9. Assess the amount ford is likely to receive if it pursues its IPO alternative versus being bought
by a private equity group.
10. What factors would be considered in assessing whether the consortium’s bid is likely to beat
that of a rival group?