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Summit Partners Case Solution & Answer

Summit Partners Case Solution

Introduction

in  February 2013,John Carroll and Alexander Whit-more, who are the managing directors at Summit Partners, wanted to invest in Microsoft, LLC (RoboSoft).They provided automation of data-center, business intelligence and solutions of security software to the operating system at IBM. When Summit invested in Microsoft, in past; it did well.Summit was then considering to make an investment in Microsoft for the second time when the company was put up for sale in 2012. (Susan Chaplinsky, 2020)

Summit Partners was founded in 1984, with the commitment of partnering with excellent entrepreneurs,in order to accelerate the growth and generate profit.

Many growing companies in the world chose Summit as their best investment partner. Summit had a team of more than 100 investment professionals and 27 Managing Directors that had a tenure period of 14 years. The company had the team support and capital to utilize for achieving its initiatives.(Partners, 2021).

Since 1996, Summit had been continuously working on bringing improvement and having more advanced technology alongside better growth. Summit became a pioneer in software as well as mobile app development in 2008.During these years, technological changes affected human lives significantly, and the world has transformed into a technological hub.(Microsoft, 2021)

Problem Statement

Summit is planning to buy Microsoft, for which ithas invested from its growth equity fund of $103.6 million, apart of which it also invested$43.9 million from its subordinated debt funds. This case introduces mezzanine investments to students, as it deals in equity and subordinated debt investment,which helps in differentiating the considerations for investment and investors expectations of returns.The investment team’s actual deal memoir and summarizing the Microsoft investment merits,as they have qualitatively evaluated the risks and benefits of the investment and the equity investor. Internal rate of returns (IRRs) and Summit’s equity cash-on-cash returns along with subordinated debt fund investments, are quantitatively calculated. This is a significant  case survey of private equity and its investments in corporate financing, which helps in comparing the risks and returns on equity and debt investments.Students understand the residual equity, and cash flow valuation methods is assumed in this case . The excel file shows the analysis conducted on this case.

COCS for Subordinated Debt Costs and Equity Funds Costs are calculated based on the total Free Cash Flow approach. Depreciation and amortization are calculated as 3% of the revenues through which we can calculate EBIT……………………….

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