Case Detail

Case Summary

The Toys "R" Us LBO

Case Number: 5-107-002, Year Published: 2007

HBS Number: KEL168

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Authors: David Stowell; Matthew Raino

Key Concepts

Leveraged Buy-Out, Mergers and Acquisitions, Corporate Finance, Restructuring


The case simulates the experience of a private equity investor evaluating a potential investment, requiring the student to: (1) determine the risks and merits of an investment in Toys “R” Us, (2) evaluate the spectrum of returns using multiple operating model scenarios, and (3) identify strategic actions that might be undertaken to improve the risk/return profile of the investment. The case also discusses trends and participants in the private equity industry.

Learning Objectives

To understand how private equity firms analyze investment opportunities through application of an LBO model (provided in the case) that summarizes returns and risks. Also, the case provides an opportunity for students to review private equity participation in club deals, large (and early) dividends, and IPOs.

Number of Pages: 23

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: United States

Industry: Consumer Products

Organization Name: Toys "R" Us

Organization Size: Medium

Year of Case: 2005