Case Study: Brazos Partners and Cheddar’s Inc.
Brazos Partners is a company founded by Randall S. Fojtasek, Jeff Fronterhouse, and Patrick McGee in 1999. It is a Leverage Buyout Firm that targets companies with enterprise values between $50 and $250 million, solid management, a well-defined niche and is often close to the Brazos’ Dallas home. Location is an essential part of Brazos cooperate strategic management; according to Patrick McGee Texas is the 11th largest stand alone economy in the world and has the third largest universe of public and privately held mid-market companies in the US. In addition, it is very underserved with only a dozen LBO groups, most of which were energy specific.
In 2002, Brazos was contacted by an…show more content…
The main questions facing Fojtasek and the Brazos partners is whether they should do another deal with Cheddars and if so what price should they sell their ownership shares back at and what concessions they should make. I believe that Brazos should do the deal with Cheddar’s. The company has proven itself to be a winner and is projected to grow even more over the next few years. With restaurants being built at twice the anticipated pace and the success of its spinoff chain Fish Daddy’s, Cheddar’s is projected to out preform all five of its top competitors. Not only is there continued success on the horizon, at the core of Brazos business strategy is relationships and Cheddar’s has proven to be a solid business relationship. Since Cheddar’s is clearly in a growth stage that relationship must continued to be valued in order to achieve the maximum profitability. With regards to the stock price, Cheddar’s stocks were valued at $1 dollar per share with a $60.5 million investment, which is Cheddar’s stock value according to Bravos initial investment. Using Cheddar’s 2004 revenue adjusted for EBITDA and the multiplier (7.1) I came up with a new value of $88.75 million then divided that by the initial investment. My calculations gives the company a per share value of $1.47. I would hold Cheddar’s to that price. There was also the issue of the new real estate policy brought forth by the Cheddar’s board. While the concern that the trajectory of that plan
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