Ducati Case
Ducati: Taking on the Challenge
On the first business day of January 2006, Federico Minoli pulled up and parked his Ducati Multistrada motorcycle in front of the Ducati headquarters in Bologna, Italy. As he looked up at the complex, which housed offices, the assembly factory and the Ducati museum, he reflected back on the company’s history. 2006 would mark several anniversaries: 80 years since Ducati was established to produce electronic radio equipment; 60 years since Ducati had been producing motorcycles; and ten years since Minoli had become the company’s CEO. Minoli joined the then near bankrupt Ducati in 1996, and led its turnaround by creating the “World of Ducati,” a world that involved superior engineering, Italian heritage, slick design and an undeniable attraction for racing enthusiasts to “join the tribe” and become “Ducatisti.” Revenues moved from €95 million to €380 million from 1996 to 2000. EBITDA improved from a loss to €60 million in the same period. However, in the five subsequent years, business results stalled: revenues fell 2.3 percent on a compound annual growth rate from 2000 to 2005, and EBITDA fell to -€273,000 at the close of 2005.
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In late 2005, an agreement was signed by shareholder Texas Pacific Group to sell its 30 percent stake in Ducati to InvestIndustrial Holdings SA and a syndicate of other investors, with the understanding that Ducati would pursue a capital increase of €80 million. Minoli was certain that the new shareholders would demand certain changes to cut costs and get the company’s growth back on track. In selling the concept of the capital increase to the shareholder base, he would need to articulate a plan that would address the immediate financial concerns as well as longer-term strategic considerations. Minoli stated: “We had a very successful turnaround from 1996 to 2001. The issue with the turnaround was the question ‘what’s next?’ Unfortunately for us, the ‘next’ already happened and it wasn’t very pretty.
On the first business day of January 2006, Federico Minoli pulled up and parked his Ducati Multistrada motorcycle in front of the Ducati headquarters in Bologna, Italy. As he looked up at the complex, which housed offices, the assembly factory and the Ducati museum, he reflected back on the company’s history. 2006 would mark several anniversaries: 80 years since Ducati was established to produce electronic radio equipment; 60 years since Ducati had been producing motorcycles; and ten years since Minoli had become the company’s CEO. Minoli joined the then near bankrupt Ducati in 1996, and led its turnaround by creating the “World of Ducati,” a world that involved superior engineering, Italian heritage, slick design and an undeniable attraction for racing enthusiasts to “join the tribe” and become “Ducatisti.” Revenues moved from €95 million to €380 million from 1996 to 2000. EBITDA improved from a loss to €60 million in the same period. However, in the five subsequent years, business results stalled: revenues fell 2.3 percent on a compound annual growth rate from 2000 to 2005, and EBITDA fell to -€273,000 at the close of 2005.
1
In late 2005, an agreement was signed by shareholder Texas Pacific Group to sell its 30 percent stake in Ducati to InvestIndustrial Holdings SA and a syndicate of other investors, with the understanding that Ducati would pursue a capital increase of €80 million. Minoli was certain that the new shareholders would demand certain changes to cut costs and get the company’s growth back on track. In selling the concept of the capital increase to the shareholder base, he would need to articulate a plan that would address the immediate financial concerns as well as longer-term strategic considerations. Minoli stated: “We had a very successful turnaround from 1996 to 2001. The issue with the turnaround was the question ‘what’s next?’ Unfortunately for us, the ‘next’ already happened and it wasn’t very pretty.