Case Scenario 3: Zachary, Wesley & Partners

question 35

Essay

Case Scenario 3: Zachary, Wesley & Partners.
Zachary, Wesley & Partners (ZW&P)is a leveraged buyout (LBO)firm that specializes in friendly buyouts of mid- sized U.S. retailing and manufacturing firms. ZW&P shuns turnarounds and hostile takeovers; its typical deals
retain the existing management team and provide extensive funding for what is perceived to be an already sound strategy. It focuses on this type of firm because the partners have good contacts in retailing and manufacturing and they are typically able to avoid bidding wars when the LBO is negotiated. The firm has been immensely profitable over the years, in part due to the very extensive and selective due diligence process used to winnow down the list
of prospective targets. Fewer than one out of one hundred candidates are even approached, and only a fraction of these passes further screens in the LBO negotiations. The resulting profitability has, in turn, given ZW&P a strong reputation in the financial community for successful deals, and among managers for being able to put together needed financing with good business plans.
-(Refer to Case Scenario 3). What factors may threaten the ability of ZW&P's resources and capabilities to generate continued success?

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Definitions:

Substitution Effect

A concept in economics where an increase in the price of a good leads to consumers replacing it with a cheaper alternative.

Consumer Behavior

The examination of how individuals, groups, or organizations choose, acquire, consume, and discard products, services, experiences, or ideas in order to fulfill their needs, and how these activities affect both the consumer and the broader community.

Price Skimming Strategy

A pricing approach where a firm charges the highest initial price customers will pay and then lowers it over time.

Penetration Strategy

A marketing approach aimed at increasing market share for a product or service by entering the market with a low price.