Ducati & Tpg
Ducati and Texas Pacific Group Case StudyFinancial PolicyApril 8, 2010 | Chris CovielloMatt CarrozzaChris HammondNick Baseel |
Introduction
In the Fall of 1995 Texas Pacific Group (TPG), by way of Abel Halpern, expressed interest in purchasing Ducati, the Italian motorcycle company, from Cagiva, an Italian conglomerate owned by the Castiglioni family. Cagiva owned a number of diverse companies but had become excessively leveraged, and Ducati's profits were believed to be supporting other failing businesses of the conglomerate. This financial difficulty led the Castiglioni family to begin searching for new financing and, ultimately, meeting Halpern. Halpern had never done business in continental Europe before, but understood that doing business in Italy would be much different than in the U.S., especially since this was the largest LBO ever in Italy. Halpern and his associates had to carefully structure a complex deal to satisfy cultural sensitivities, perform intense and expensive due diligence, structure finance based on Italy's high-yield market, and take into consideration the Italian equity environment and corporate governance structures before an offer was made.
Texas Pacific Group
The private equity fund TPG was formed in 1993 by David Bonderman out of a special fund which was designed to purchase Continental Airlines and AmericanWest Airlines. Prior to TPG, Bonderman worked with Robert Bass, an early industrialist/leveraged buyout investor, where he worked on troubled and out of favor companies. TPG's international exposure was minimal, and with Halpern the company ventured further into international space. Investments for TPG fell within a range from $20 million to $100 million in companies with market values that typically range from $100 million to $2.0 billion, and a target minimum portfolio internal rate of return of 35% on invested capital. Additionally, TPG would be present on the company boards and actively participate in strategic
Introduction
In the Fall of 1995 Texas Pacific Group (TPG), by way of Abel Halpern, expressed interest in purchasing Ducati, the Italian motorcycle company, from Cagiva, an Italian conglomerate owned by the Castiglioni family. Cagiva owned a number of diverse companies but had become excessively leveraged, and Ducati's profits were believed to be supporting other failing businesses of the conglomerate. This financial difficulty led the Castiglioni family to begin searching for new financing and, ultimately, meeting Halpern. Halpern had never done business in continental Europe before, but understood that doing business in Italy would be much different than in the U.S., especially since this was the largest LBO ever in Italy. Halpern and his associates had to carefully structure a complex deal to satisfy cultural sensitivities, perform intense and expensive due diligence, structure finance based on Italy's high-yield market, and take into consideration the Italian equity environment and corporate governance structures before an offer was made.
Texas Pacific Group
The private equity fund TPG was formed in 1993 by David Bonderman out of a special fund which was designed to purchase Continental Airlines and AmericanWest Airlines. Prior to TPG, Bonderman worked with Robert Bass, an early industrialist/leveraged buyout investor, where he worked on troubled and out of favor companies. TPG's international exposure was minimal, and with Halpern the company ventured further into international space. Investments for TPG fell within a range from $20 million to $100 million in companies with market values that typically range from $100 million to $2.0 billion, and a target minimum portfolio internal rate of return of 35% on invested capital. Additionally, TPG would be present on the company boards and actively participate in strategic