DW Healthcare Partners Case Study Solution
Introduction
DW Healthcare Partner is a well-known organization known as a private equity organization. It is located in Salt Lake City (Utah) and it presents specialization in healthcare products and services. In the year 2006, the organization raised its first funding of about ($88 million) in (Fund I). This investment portfolio involves six different companies’ stakes. Now DWHP looks to move towards (Fund II) with a ($200 million) investment in more new companies.
Moving towards this process there are various concerns and challenges raised in front of the organization that ultimately impact the (Fund I and II) portfolio. These concerns are related to the low realization in (Fund I) and increasing risks among investors because of the interest and efforts mismatching. The major risk and challenge that occur is the illness of Klintworth that put a negative effect on the investment portfolio. Now DWHP looking for new and other options that help to reduce the challenges and risk and then the organization becomes able to increase its overall performance.
Strategic Explanation on DWHP Postpone Fund II
The analysis presents that Fund I presents low realization that ultimately put investors in worry and most the investors feel to stop or postpone Fund II until the term end of Fund I. various strategic reasons support this postponed decision, which firstly includes that one of the potential and largest (LP) investor committed capital about ($30) million in a Fund I and in the current procedure of Fund II this investor refuses to invest in Fund II.
This factor becomes the main factor that pushes investors to postpone Fund II. The other factor raised after meeting with (110) new potential investors and it results that most of the investors did not ready to invest because they believes that Fund II is a straightforward and short-lived process. Fund I only have one realization because all remaining investments are premature and investors are concerned that sales of their holdings are not able to generate much return. The two main issues that raised a postponed decision are a lack of realization in Fund I and high partnership risks that present a mismatch between investments.
Sell Tandem Tech by DWHP
After analyzing the conditions of Tandem Tech investment it presents that DWHP invests ($6.8) million for 73% stakes of the organization. The data present that investing in Tandem Tech presents low engagement of customers with the organization and is not able to generate appropriate revenues that ultimately impact the EBITDA of the organization. However, introducing the activity-based cost system helps the business to refocus on its pricing and resources that ultimately help to improve the profitability of the organization.
It indicates that there is growth found in the EBITDA of Tandem Tech from ($2.1 to $3.1) million, which ultimately increase the value of the investment and DWHP got an offer of ($28 million) of its investment. The forecast for the 2007 year its EBITDA presents good growth with ($5.1 million). All of these factors reflect and conclude the result that selling Tandem Tech now is like neglecting the upcoming money and on another hand, the increasing growth rate of investment indicates that holding the investment for the term end period generates high returns with good positive performance.
After calculating the DCF by using the given data for Tandem Tech it presents that its EBITDA contains good growth in each year till the term ends in 2013. For DCF analysis use EBITDA as free cash flow and the results present a ($277.2) million terminal value of this investment, which indicates that holding this investment till term end generates high returns. The calculated NPV is ($339.36) million which presents that selling investment now is not appropriate for DWHP. The optimal year to sell Tandem Tech is (2013) to get higher returns over total investments.................
DW Healthcare Partners Case Solution Strategic Growth
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