Aurora Capital Case Study

Aurora Capital Case Study

In the specific case of Aurora Capital, there is a great offer that was put on the floor for the management of the firm. The question at hand in the recent case given was that should they push the firm to commit the hundreds of thousands, and possibly millions, of dollars necessary to complete the business, financial, and legal diligence required to purchase Douglas Dynamics? As well, if they do decide to acquire the company how much should they be willing to bid? Throughout this write up I will explain to you on why I have decided that the purchase of Douglas Dynamics would be in the best interests of Aurora Capital Group. Also I will show you how I have determined that on the specific amount that Aurora should offer AK Steel for the purchase of Douglas Dynamics.

Aurora Capital Group was founded for solely the purpose of acquiring middle-market companies while maintaining a partnership with operating management. Aurora Capital was founded in 1991 and has approximately over $2 billion dollars of assets under management's control. Over the last couple of years the Aurora Capital group has focused on generating value in its portfolio companies by looking and focusing on their earning enhancements. This goal has been sought out through many ways including the purchase of having 14 platform transactions as well as accumulating over 100 add-on acquisitions. Aurora felt by making these certain acquisitions and targeting middle-man diversified companies was the most successful was to help the group gain the highest net return on their investments.

Aurora's main task at hand was to have an operating approach that focused on building value. Aurora helped hit their goal by focusing on a couple of different areas such as targeting the middle market companies and firms, maintaining an experience and well knowledgeable advisory committee and executive network, keeping true to their control positions, continuing to have flexible holding periods, and to carry on the task of having a very careful investment selection process. These were a couple of ways that Aurora was able to stay true to its mission and were able to operate at a level of effectiveness.

Douglas Dynamics has been another successful firm in its industry. Douglas Dynamics was a functioning union of AK Steel acquired during the 1999 merger with Armco Inc. Douglas Dynamics was the leader in North America in designing, manufacturing, sales and support of detachable snow and ice control equipment including snowplows and sand & salt spreaders. The products that Douglas created were for both personal and professional uses, but the majority of their customers were used in the landscaping business and for other professional areas in the market. The only issue that the company really has is with how the weather patterns affect the amount of profit and output Douglas Dynamics will have. If it is a very busy winter season, the company will flourish in sales. On the other hand, if the winter is dry and does not have a big snow season the level of sales will decrease significantly.

One investment highlight that Douglas Dynamics did poses was its ability to have a significant market leadership and an installed base of consumer loyalty. Douglas held a majority share of the total snowplow market. The firm's achievements were motivated by brand recognition and the reputation for quality, revolution, productivity, reliability and service engendered by the company's Western and Fisher products. Douglas' installed base of over 450,000 snowplowing items was a significant competitive advantage. This is a key detail for an industry where strong brand loyalty, often developed over many generations, led to many repeat purchases.

Some of the other investment highlights included consumer loyalty and brand equity, broad and innovative product offerings, extensive and diversified distributer network, and manufacturing capabilities, compelling free cash flow dynamics, and this list goes on and on. What makes Douglas Dynamics stand out is its ability to separate itself for the pack in