Ducati & Texas Pacific Group – a ”Wild Ride” Leveraged Buyout
Ducati & Texas Pacific Group – A ”Wild Ride” Leveraged Buyout
1. What is the nature of the opportunity? Could the Ducati brand be expanded beyond motorcycles? Why or why not?
TPG strategy is to invest in undervalued firms’ that usually have been poorly managed. The investments are made in privately hold firms that are either unlisted from the beginning or that is being delisted from the stock exchange under the LBO process. TPG wants to invest in firms with a “healthy” basis but that are experience some problems that TPG believes’ that they can fix. Does Ducati live up to this?
TGP has the opportunity, if the deal goes through, to purchase a controlling stake in Ducati Meccanico, producer of the best motorcycles in the world. The article describes that Ducati was in a great position of becoming for street bikes as what Harley-Davidson was for cruisers. They have a recognized brand, in spite of limited marketing, associated with high performance, i.e. high quality and high technology. Their bikes crushed the competition and won the World Superbike championships for several years in a row; 1990, 1991, 1992, 1994 and 1995. Their racing performance indicated on technical brilliance which is just what street bike customers’ prefer and therefore they had customers on the wait lists to buy their bikes. The core business possible growth was considered as high when comparing their number of sales to Harley-Davidson sales. In addition, to this the market didn’t foresee any new entrants of street bikes which also work in their favor. The manufacturing fundamentals were strong with low fixed costs due to high levels of outsourcing, 85 %. They offered the customers 15 models of bikes in four families founded on seven various engines. Furthermore, the most expensive part of an engine is the crank cases and cylinders but Ducati can keep these costs low since they have high levels of standardization of their engines and therefore only need two crank cases and three
1. What is the nature of the opportunity? Could the Ducati brand be expanded beyond motorcycles? Why or why not?
TPG strategy is to invest in undervalued firms’ that usually have been poorly managed. The investments are made in privately hold firms that are either unlisted from the beginning or that is being delisted from the stock exchange under the LBO process. TPG wants to invest in firms with a “healthy” basis but that are experience some problems that TPG believes’ that they can fix. Does Ducati live up to this?
TGP has the opportunity, if the deal goes through, to purchase a controlling stake in Ducati Meccanico, producer of the best motorcycles in the world. The article describes that Ducati was in a great position of becoming for street bikes as what Harley-Davidson was for cruisers. They have a recognized brand, in spite of limited marketing, associated with high performance, i.e. high quality and high technology. Their bikes crushed the competition and won the World Superbike championships for several years in a row; 1990, 1991, 1992, 1994 and 1995. Their racing performance indicated on technical brilliance which is just what street bike customers’ prefer and therefore they had customers on the wait lists to buy their bikes. The core business possible growth was considered as high when comparing their number of sales to Harley-Davidson sales. In addition, to this the market didn’t foresee any new entrants of street bikes which also work in their favor. The manufacturing fundamentals were strong with low fixed costs due to high levels of outsourcing, 85 %. They offered the customers 15 models of bikes in four families founded on seven various engines. Furthermore, the most expensive part of an engine is the crank cases and cylinders but Ducati can keep these costs low since they have high levels of standardization of their engines and therefore only need two crank cases and three