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    PEVF

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    Harsh Shah
    Apax saw recapitalizing Xerium as a way to exit its investment and reassure its own investors, as the offers it received for Xerium did not meet its target valuation and market conditions were unfavorable. Recapitalizing also avoided further management distraction and made use of favorable debt market conditions. From Apax's point of view, recapitalizing would not be worth it as even the lowest final offer would provide over 2.5 times their initial investment. However, from Xerium's perspective, recapitalizing would allow it to keep more value within the company and benefit management shareholders, though increased debt could limit future expansion. Recapitalizing would also allow Xerium to

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    PEVF

    Uploaded by

    Harsh Shah
    66 views1 page
    Apax saw recapitalizing Xerium as a way to exit its investment and reassure its own investors, as the offers it received for Xerium did not meet its target valuation and market conditions were unfavorable. Recapitalizing also avoided further management distraction and made use of favorable debt market conditions. From Apax's point of view, recapitalizing would not be worth it as even the lowest final offer would provide over 2.5 times their initial investment. However, from Xerium's perspective, recapitalizing would allow it to keep more value within the company and benefit management shareholders, though increased debt could limit future expansion. Recapitalizing would also allow Xerium to

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    Recapitalisation

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    Apax saw recapitalizing Xerium as a way to exit its investment and reassure its own investors, as the offers it received for Xerium did not meet its target valuation and market conditions were unfavorable. Recapitalizing also avoided further management distraction and made use of favorable debt market conditions. From Apax's point of view, recapitalizing would not be worth it as even the lowest final offer would provide over 2.5 times their initial investment. However, from Xerium's perspective, recapitalizing would allow it to keep more value within the company and benefit management shareholders, though increased debt could limit future expansion. Recapitalizing would also allow Xerium to

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    66 views1 page

    PEVF

    Uploaded by

    Harsh Shah
    Apax saw recapitalizing Xerium as a way to exit its investment and reassure its own investors, as the offers it received for Xerium did not meet its target valuation and market conditions were unfavorable. Recapitalizing also avoided further management distraction and made use of favorable debt market conditions. From Apax's point of view, recapitalizing would not be worth it as even the lowest final offer would provide over 2.5 times their initial investment. However, from Xerium's perspective, recapitalizing would allow it to keep more value within the company and benefit management shareholders, though increased debt could limit future expansion. Recapitalizing would also allow Xerium to

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    of 1

    QUESTION 5

    5.1. Why recapitalization?

     None of the 40 offers received by Xerium was meeting the target valuation set by Apax
    and given the unsavory market conditions, Apax saw Xerium as a means to revive Euro
    Fund IV and reassure its investors.
     Also Apax had already narrowed down to two buyers, both not giving expected price.
    Going back to others would look ugly.
     Already there has been over 10 months of management distraction, taking more time would
    come at the cost of business
     The debt market was in a good condition which could facilitated the re-financing.

    5.2. Is recapitalization worth it? How would it affect concerned parties?

    Apax Point of View

    If it is decided that the company would be refinanced, Apax would exit at 1.2x of its investment.
    However, even at the least of the two final offers i.e., at a valuation of $935 million, Apax would
    receive more than 2.5 times its investment. Hence, this is would not be worth it from the point of
    view of Apax

    Xerium Point of View

    In case, the company goes in for refinancing, the debt in the books would substantially increase to
    almost twice its present debt. This could hinder any further expansion of the business in terms of
    acquisition of competing firms. However, given the performance of Xerium and expected
    improvement in market conditions, refinancing would keep the value within the firm which could
    be most beneficial to the owners of the share allocated to the management. Hence, from Xerium
    point of view there is tradeoff. Also, Xerium could look after growth opportunities and the cost
    cutting opportunities identified while preparing for bidders questions. And with expected
    improvement in market conditions, it may add glamour to the industry and may help Xerium fetch
    a better price and buyer.

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