Bain Capital buys Ford in 1987

It is hard finding data via google. when would the offer be made? i have a range of 6-9% interest rates for 1987; does anyone know Ford's market cap? Also, Bain has how much $ to play with? expect they want 15-20% returns/year off the top of my head. Any other info for a scenario?



The historical float in 1987 was ~55 million shares between 8-9 dollars a share

i would figure Bain buying up the float to enact a hostile take over would lead to the stock going to 11-12... they would have to do it very rapidly in order to prevent the ford family and the existing board from doing secondary offerings to try and dilute them from taking over... so a 50% premium money bomb is probably required and 12 dollars a share at 55 million shares is a 600 million market cap meaning romney would have to come up with 300 million and 12 dollars to gain voting control of the company

Bain had 50ish million on hand in the start of 1987 and raised another 107 million during the year.... could they raise another 150 million, I think yes if Romney named Ford as a target to his investors however he would have to suppress all rumors whilst doing it, because rumors would lead to the following

1. run up in the stock price making it harder for bain to buy it out
2. panic secondary offerings by the ford board and family to try and prevent bain from enacting the hostile takeover

Romney could alternatively buy 25-30 percent of the float with his cash on hand and then try to secure allies amongst large shareholders to have him named ceo and bain partners named to the board as a track to improving stock price and unlocking value... this could probably be done as the ford family and existing board were not popular at this time to the financial fuck ups of the previous decade... however this would require romney to work "within the system" and limits the amount of sweeping change he could make to the company

the former where Bain conducts the hostile take over then takes the company private would allow Romney to make whole sale operational changes whilst being able to ignore or squash all opposition
 
The financial problems were due to financial mismanagement (not managing inventories or financing properly and counter productive labor contracts) not the actual cars... which is something that Romney's people could theoretically clean up with even a moderately competent analysis

Not really true at all. By 1987, the UAW was dealing with the automakers - Chrysler's brush with death and AMC's failure had forced them to - and Ford's problems in the early 1980s were partially due to mismanagement and partially due to the problems with the products. Ford's sales had a considerable turnaround with the Taurus, which they needed because they were teetering as a result of the big costs they had run up making the Fox-body cars (Mustang, Thunderbird, LTD series, Fairmont), Escort, Sierra and Taurus. The company's sales had sagged badly in the 1970s (worse than GM though better than Chrysler), and as a result they bet big on the aero-style cars of the 1980s. Had the Taurus flopped, the company would have gone bust in 1988 or 1989.

The big 3 in the period SUFFERED from a lack of outside input, particularly into their financial dealings... whilst Bain may have raided healthyish companies, Ford in 1987 is a ripe turn around target for a huge ROI

With its immense debt load (and aging physical plant and equipment - a real problem for Ford in the 1990s and 2000s), Bain wouldn't touch it, and if they did, it would require enormous investment to make work. I don't think Bain has the money to both buy the company and pay for a major rehabilitation of them. Yes, Detroit had many problems with its finances, but bring in corporate raiders like Bain isn't gonna help matters, it would if anything hasten the demise.
 
Not really true at all. By 1987, the UAW was dealing with the automakers - Chrysler's brush with death and AMC's failure had forced them to - and Ford's problems in the early 1980s were partially due to mismanagement and partially due to the problems with the products. Ford's sales had a considerable turnaround with the Taurus, which they needed because they were teetering as a result of the big costs they had run up making the Fox-body cars (Mustang, Thunderbird, LTD series, Fairmont), Escort, Sierra and Taurus. The company's sales had sagged badly in the 1970s (worse than GM though better than Chrysler), and as a result they bet big on the aero-style cars of the 1980s. Had the Taurus flopped, the company would have gone bust in 1988 or 1989.



With its immense debt load (and aging physical plant and equipment - a real problem for Ford in the 1990s and 2000s), Bain wouldn't touch it, and if they did, it would require enormous investment to make work. I don't think Bain has the money to both buy the company and pay for a major rehabilitation of them. Yes, Detroit had many problems with its finances, but bring in corporate raiders like Bain isn't gonna help matters, it would if anything hasten the demise.


Ford had no grasp of it's inventories and was being forced to offer huge margin killing incentives though; plus their financial moves on dividends, stock splits, buy backs and bond issuance were pants on head insane. The board and the ford family just sent the cars to the dealerships regardless of what was selling where and in what numbers because that's the way they always did things. Someone from a financial background whilst having a large task would be able to at least change that aspect of the company's operations

Also with rapidly declining interest rates, refinancing ford's old debt to free up cash flow to either retire that debt or to make operational investments to improve product/productivity would not be exceptionally difficult in the late 80's/early 90's either (as was done in OTL)

Like I said, the underpinnings of a ripe turn around target were there for someone with the vision to go through with it, Bain could probably return 100 percent of their investment in 48 months if Romney pushed the right buttons and just tackled the financial/inventory mismanagement and refinanced the company's debt
 
On the other hand, big time deep level experience in engineering and running billion dollar manufacturing companies that actually do something. That sort of proves my point. They hired a man with actual technical competencies.
Yes but no automotive technical competencies, which is very different from your point about having to 'know the field'. If you'd just said the boss would need experience of running a big engineering firm I'd have agreed, it was the idea they would have to have automotive specific experience that I was disagreeing with.

But then again, they were up agains other car guys at Toyota, Hyundai, BMW, Volkswagon, etc. etc. who were all dead smart car guys who spent decades working in the area. So GM and Chrysler were beaten fair and square by people who knew the job just as well or better. What lesson do you take from that?
The lesson I take is that time in research is never wasted. In the late 1980s/early 1990s;

Hyudai - Chung Mong-koo was boss at the time, background heavy engineering and precision pipe group. Not cars.
VW - Crashed and burned in the US market through the 1980s and by the end of the decade they close their only US factory. Ran by a succession of 'car guys' poached from the US Big Three.
Toyota - Shoichiro Toyoda was boss, previous job was head of Toyota's sales and marketing division. Had originally qualified as an engineer though.
BMW - Didn't have a factory in the US till the early 1990s due to complete lack of sales

So I agree GM and Chrysler were beaten fair and square by companies ran by dead smart engineers. They were not however beaten by car guys, so the point I take in the 80s/90s having a background in automotive engineering was either not helpful or positively unhelpful in dealing with the changing market.


On the actual topic, what was Bain's normal plan on running a company? I'd certainly agree that Romney or A.N.Other venture capitalist is probably a bad person to run Ford and it wouldn't end well. But if they just sacked all of Ford's upper management, brought in a new team (people with a non-car but still engineering background naturally ;) ) and let them loose, then I can see that possibly working. I just don't know if that's how Bain did things.
 
I work within the field of corporate restructuring and corporate insolvency.

So one of the first things that any potential purchaser will look at is the cash flow, sales reports, employee turn over, market share, capitalisation of the company etc - all the components of due diligence.

Now comes the harder part when you conduct a valuation and work out if you can trade the company out of their present woes or whether there would be a greater return if you wound up the company and realised the assets.

Noting that Ford is around today, then we can work under the assumption of the former. I think that the main requirement for the new CEO would be to an excellent businessman and to be able to recognise the company inefficiencies. He does not need to be able to draft a micro level plan for rectification, but rather recognise and propose a course of action to correct said inefficiencies.

This would then come into talent management and recognising how to promote those that have the ability to assist with turning the company around or headhunt those skills if external to the firm.

Although my experience is limited to small - medium private companies, not large complicated public companies.
 
This thread is worthless partisanship. Who seriously thought this would be a good idea when partisan myopia is at its fever pitch.
 
This thread is worthless partisanship. Who seriously thought this would be a good idea when partisan myopia is at its fever pitch.

I wasn't considering it a partisan thread... I thought it could be a worthwhile spinoff from our save detroit thread to consider
 
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