Mergers, Acquisitions and Takeovers Case Study

KKR’s Bid for Vivendi: The Challenges Ahead

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Abstract:
On November 5, 2006, Kohlberg Kravis Roberts (KKR), the New York based private equity firm offered $50.8 billion to take over the French music and telecommunications group Vivendi in a deal that would have been the world’s biggest buyout. The deal demonstrates the growing prowess of private equity on the global stage. KKR had been in discussions with JP Morgan Chase and Citigroup about financing the transaction. Back in October 2006, Vivendi paid $1.6 billion for Bertelsmann’s music publishing business, making it the industry’s largest recording company and music publisher. KKR primarily focuses on late stage leveraged buyouts. According to analysts, Vivendi is trying to reap the benefits of cross-promoting its content among various platforms. Analysts were divided in their opinion regarding the deal. French regulations prevent foreign concerns from owning majority stakes in broadcasters. Moreover some analysts raised doubts over the justification of the marriage between music and private equity. This case explores the prospective synergies of this deal in particular and the scale of power, buyout firms now hold in the global merger and acquisition market in general.

Pedagogical Objectives:

• To understand the US music industry
• To understand the increasing
dominance of the private equity firms as global acquirers
• To understand the business model of the private equity firms
• To understand the business model of Vivendi, the largest recording company and music publisher in the world
• To debate the potential synergies and challenges of the acquisition of Vivendi by the private equity firm Kohlberg Kravis Roberts & Co (KKR).

Keywords : Mergers,Acquisitions,Alliances Case Study;Kohlberg Kravis Roberts & Company (KKR); Vivendi; HCA (Hospital Corporation of America); Private equity; Music industry; MER Capital; BMG (Bertelsmann Music Group); Performing right societies; Mechanical right societies; Recording industry; Warburg Pincus; Leveraged buyouts; RJRN Nabisco; Junk bonds; Bear Stearns

Contents : 
Music Industry
Private Equity Firms
Vivendi’s business divisions
The Proposed Buyout
Organizational Structure- Vivendi
History of Vivendi