This report is to discuss about the reason why Yellowstone Cattle Bank (YCB) will be the prefer transaction. The first part will analyse which type of leverage buy out (LBO) YCB belong to, thus find out the ways to get success in this transaction theoretically. The second part of this report will elaborate and analyse the pros and cons by choosing YCB surround different steps of whole transaction.
Define the type of deal in YCB transaction
According to the information provided by the case and the definition of variety of Private Equity investments, in this case Yellowstone Cattle Bank is involved in both Platform roll–up and growth LBO.
From the information that provided, YCB is operated in a fragmented and consolidated …show more content…
The information indicated that YCB have opportunities to reduce the backend services and switch services cost. To study of the YCB business model we find out that the Switch (front end) and back end cost are the only costs that can probably controlled by YCB, due to the other costs are mainly charged by the bank or Visa/Mcard Association it is more likely impossible to reduce those costs. Therefore it can become an advantage for Newport’s, due to the integrate backend services and build switch services plan are already existed, it can reduce the time and labour consuming to seek for an operation cost reduction plan and they can focus more into the future planning.
At the last step of the transaction will be sell out all of the shares to obtain the profit, however whether Newport’s can successfully to sell the company will be the main concern by Newport’s. Obviously the recent transection of the comparable company answered the question above. The background mentioned about YCB is in the fragmented and consolidated industry, it implied that acquisition and merger will always occur in this industry. Furthermore the recently transection can be a strongest evident that there have a certain demand in this industry. On the other hand the transaction selling price of the comparable company can be a benchmark for Newport’s use for calculates the expected profit in the