IMD-1-0269 © 2009
Lachowitz, Jonathan; Leleux, Benoit F.

He was negotiating the next round of funding for the company that a team of fellow supervisors along with him, had got through a management buyout in the autumn of 2001. At that time, a leading European buyout group, RIFE Capital, got control and bulk ownership in Kooltex. Since that initial buy out, the business’s income had doubled and its own EBITDA was multiplied by three to around CHF 22.9 million, or about €14 million.

Initially, the whole management team had got some 15% of the equity in the first trade and negotiated a major exit-based incentive strategy; they stood to profit handsomely from the secondary buy out which was priced at a level that will activate most of the ratchets in the operation motivator. The liberty to run, together with the added financial resources obtained via the buyout funding, had enabled them to unleash an ambitious growth and profitability strategy, leading the organization against bigger competitors in North America as well as Europe to notable market share increases. Learning objectives: Using Monte Carlo simulation to value complicated, nontraditional options, like management stock option strategies in the context of buy outs.

Subjects: Monte Carlo simulations; Valuation; Option pricing
Settings: Textile and Fiber Production; Switzerland; 120 employees; 2007

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