Questions for Hertz LBO

1. What re the reasons behind Ford's decision to put Hertz for sale? What are
its alternatives? What are the pros and cons of each?
2. What is a leveraged buyout (LBO)? How do private equity firms seek to
generate a return on an LBO?
3. What are the risks for an investor on a Hertz LBO? What factors should a
buyout firm consider before submitting a bid?
4. Can buyout buyers create value at Hertz? What are the potential sources
of value creation?
5. Based on the case Exhibits 8-10 and your estimate of terminal value, if the
private equity firms invest $2.3billion in equity what rate of return can
they expect to earn?
6. based on the private equity firm's required rate of return (20%) what price
can they pay for Hertz? How does it compare against the price Ford may
earn with an Hertz IPO?