Introduction

Berkshire Partners is a private equity firm in Boston, founded in 1980s by five individuals. The core values of the firm were set to be strong relationships, combined decision making of all individuals involved, analysis and hard work. By 2001, the five member team grew to 28 member group, including managing directors, principals, investment staff,and advising directors.

In analyzing a potential deal, the company relies largely on its own team and each of its deal team comprises of four to five members. Besides that, the team uses the help of professionals line Bain and McKinsey, Ernst & Young, and several law firms for technical issues.

The right financing structure needs to be determined for making a profitable deal and the management of the company believes that a deal should contain at least 25% of equity financing to achieve the desired results. Besides that, the management also believes that at least 25% of the equity financing makes the deal look like a serious commitment.

In addition to that, the use of equity financing provides the company with a supporting role in the management of the business of the target company. These roles include prioritizing of key objectives of the company, review of the design of organization, decision regarding management positions, and integration process in subsequent acquisitions.

The Berkshire management believes that the due diligence process is one of the most important parts in the decision-making regarding investments. The reason behind this is that it helps the company make smart decision making and is critical to the foundation of the operations during the life of investment.

Berkshire Partners Bidding for Carter’s Case Solution & Answer

The exit strategy of the firm is to sell the company by a ratio of about four to one, as compared to the IPO. The only situation when the firm sells an investment by the IPO is when it has a strong brand name, a strong growth potential and an immense need of capital. Otherwise, the company goes for an IPO in mid investment in order to stay involved with the management and pursue growth.

Problem Statement

The Berkshire Partners have currently received an invitation to participate in an auction for a leveraged buyout of William Carter Co. The William Carter Co. is one of the leading producers of children’s apparel and clothing in the United States, and Investor Corp, which is a global investment group has put the company open for auction.

A prepackaged capital structure is also offered to the winning company by Goldman Sachs, an investment bank that is running the auction. The Berkshire Partners have decided to place a bid as the investment seems attractive to the company. The company’s deal team has decided to use a blend of debt and equity financing for purchasing the company. However, it needs to decide about the bid amount, and the ratios appropriate debt and equity ratios to maximize its return on investment……………………

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