Ducati Case Study Solution
Ducati & TPG – A “Wild Ride” LBO
Case Study
December, 2010
Q1. The nature of the opportunity and the question of brand expansion
1.1 The situation of the target firm
Positives: (1) The Ducati brand was world famous;(2) The product was great in terms of technology and quality and it had won the 1990, 1991, 1992, 1994, and 1995 World Superbike championships against strong competition;(3) Ducati’s product family was broad offering 15 models in four families based on seven different engines;(4) The company had strong manufacturing fundamentals with low fixed cost and high level of standardization of its engines.
Negatives: (1) Ducati faced severe financing problems, so it had to delay payments to some key suppliers which led to unfinished products. This in turn led to lower sales and extended customer wait lists;(2) The management was bad with its business entangled with Cagiva;(3) The financial performance was not at all transparent.
1.2 The nature of the deal. It is the takeover of a badly managed and financially distressed motorcycle manufacture firm who is strong in brand and manufacturing fundamentals. The objective is to use TPG’s mastery in management and its financing support to improve the target’s business situation.
1.3 The brand is expandable or not
We judge that Ducati could expand beyond motorcycles. To have this conclusion, we have gone through the following questions:
What kind of products Ducati could provide? As the only business of the firm is motorcycle, motorcycle related products should be the first choice. Two categories of products are suggested: (1) Clothes and motorcycle related accessories like Gloves, sunglasses, and helmets; (2) Mechanical accessories like engines and other parts.
Where does the demand come from? It’s natural that a Ducati bike fan will be happy to have a Ducati-styled wears. So clothes and accessories buyers should majorly come from current Ducati bike owners. As Ducati is famous for its engine
Case Study
December, 2010
Q1. The nature of the opportunity and the question of brand expansion
1.1 The situation of the target firm
Positives: (1) The Ducati brand was world famous;(2) The product was great in terms of technology and quality and it had won the 1990, 1991, 1992, 1994, and 1995 World Superbike championships against strong competition;(3) Ducati’s product family was broad offering 15 models in four families based on seven different engines;(4) The company had strong manufacturing fundamentals with low fixed cost and high level of standardization of its engines.
Negatives: (1) Ducati faced severe financing problems, so it had to delay payments to some key suppliers which led to unfinished products. This in turn led to lower sales and extended customer wait lists;(2) The management was bad with its business entangled with Cagiva;(3) The financial performance was not at all transparent.
1.2 The nature of the deal. It is the takeover of a badly managed and financially distressed motorcycle manufacture firm who is strong in brand and manufacturing fundamentals. The objective is to use TPG’s mastery in management and its financing support to improve the target’s business situation.
1.3 The brand is expandable or not
We judge that Ducati could expand beyond motorcycles. To have this conclusion, we have gone through the following questions:
What kind of products Ducati could provide? As the only business of the firm is motorcycle, motorcycle related products should be the first choice. Two categories of products are suggested: (1) Clothes and motorcycle related accessories like Gloves, sunglasses, and helmets; (2) Mechanical accessories like engines and other parts.
Where does the demand come from? It’s natural that a Ducati bike fan will be happy to have a Ducati-styled wears. So clothes and accessories buyers should majorly come from current Ducati bike owners. As Ducati is famous for its engine