Berkshire Partners: Bidding for Carter’s Essay

1. Berkshire brought expertise in finding the right financing structure and operational and strategy cerebrate to the retail and manu detailuring industry. Berkshire managers believed that the truth portion of a capital structure should be at least 25% to order to achieve the desired results as far as return and to show true commitment to the add base. When determining the capital structure, they also seriously took into account such questions as Is this the appropriate amount of leverage for a business of this type what do the rating look like how difficult will it be to fixate financing and what about financing costs? Once Berkshire had taken an legality position in a firm, Berkshire would help the firm management by prioritizing key objectives, improving organizational design, expression a quality team up of managers and aiding the integration process of a subsequent achievement. Berkshire would add value up front with extensive due diligence, addressing opportunities for companies, and aligning strategically and building a strong relationship with management.Since Carters was an established business, they would receive a capacious deal of care and attention up front and then hash out to low all oversight during the rest of the investment until exit. Berkshire also added value by exiting most of their investments by sale of a company instead of the ordinary initial offering used by most private equity firms. Berkshire was to a greater extent apt to facilitate an IPO in the middle of ownership with the objective of staying involved with the management and helping the company grow. Berkshires deep acquisition experience and familiarity with capital markets enabled very attractive financing to be seat in place, as Berkshire solicited the views of a range of potential difference partners including Merrill, First Union, Lehman etcetera in order to ensure the optimal financing structure.In addition, Berkshire had met with the Carter management on two occasions and had a strong, open line of communication. Therefore, Berkshire should collapse a strong understanding of Carters goals. Ultimately, Berkshire used internal and out-of-door resources to undertake a thorough planning process that both built a road map to guide managements direct execution, but also served to coalesce the team around the significant potential inherent in the opportunities ahead of their company.2. Berkshire had developed a focus on building strong, growth oriented companies in conjunction with strong equity incented management teams. Carters was definitely financially strong as mentioned in the last question and growth orientated, as they recently diversified into the subtraction market for baby and young childrens apparel and were looking to run into the two to six year old playwear segments . They had shown success in a competitive, non-seasonal industry. Carters management team was disciplined and working to increase operational efficiencies by shortening development cycle and aiming to use 100% seaward sourcing in the near future. Management was also set on building on relationships with major customers (top eight sweeping customers represented 74% of wholesale tax revenue), and to continue to build profi shelve retail outlet stores.Berkshire liked the fact that Carters was a strong recognizable brand that could be leveraged crosswise multiple channels and be viewed as a consumer products company. The only puzzle could be that Goldman Sachs was using a staple on financing structure. Berkshire matte this structure limited their ability to get an edge in the bidding process by bringing more creative financing deals to the table with Carters Investcorp valued to exit the company in mid 2000 because they were at the end of a 5 year investing period and wanted liquidity in order provide quality returns for investors to set the gift for future financing.They could of went public (IPO) with Carters in 2001 but it would take over a year to exit the situation after the IPO and the IPO market was at a standstill. In addition, in summer of 2001 Carters was on the path to operational and financial success. From 1992 to 2000, the company increased revenue at a compound annual growth rate of 9.5% with EDITDA increase 22.1%. Since Carters was bought by Investcorp, the firm had a improved brand recognition, a lower cost structure, expanded into the discount channel with Tykes, and the movement of more or less manufacturing operations offshore to reduce cost. These improvements and Carters ability to weather economic swings made the company a attractive commodity among financial buyers.