LBO and Carter

1. What are the pros and cons of Carter’s as an acquisition target for a private equity firm? Is it an opportunity that you would pursue if you worked at Berkshire?

2. Attached please find an LBO model template. Please do the following:

Set your excel to iterate calculations

Input summary projections for Carter’s, as per the case

Input a financing structure, using Goldman Sachs’ proposed staple financing in the case  and related interest costs

Input a purchase price

Input an exit multiple

Through trial and error, find a purchase price that leads to an IRR of 25% assuming an exit in 2005

Post your implied purchase price and discuss your willingness to buy Carter’s at this level.