Ktm Venture Capitalist's Exit

1686 words 7 pages

I. Summary of the case

KTM company history

KTM is a designer and manufacturer of motocross, rally and cross-country racing motorcycle that was created in 1934 in Austria. Since that time, KTM maintained a reputation for producing reliable, high quality motorcycle, and for having an expertise in manufacturing core parts. Its marketing focus has always been on building a brand image of a company with technological leadership, high quality products and a legacy of championship titles.
In the late 1980s, propelled by the strong financial markets, a financial investor purchased KTM and took the company private. Though KTM had a good reputation and quality products, it had too many products, inadequate management, and
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United States was displaying very positive signs and analysts were forecasting a sustainable pick-up in consumer spending over 2003 thanks to quite low interest rates. Eventually, Asia was still considered as a promising market.

In this context, KTM was presented diverse alternatives to conduct the exit of BC European Capital and finance its future growth.

While IPO was a very common exit option for VC investors, this opportunity could help KTM build a relationship with financial markets and ease the access to future additional funding. In the meantime, such an operation would put KTM’s management under pressure from investors or analysts and implied a sizable expense for the company.
The question of the location of the IPO was also raised. Leading it on the Viennese Stock Exchange appeared as a safe option due to the recognition of the firm in the Austrian business community. Nevertheless, a more international operation could give KTM the worldwide publicity it needed. An opportunity even more attractive when firms recently introduced in the NYSE saw extensive participation and displayed strong post-IPO share performance.

* Strategic investors
There were two main solutions for Knünz regarding strategic investors. Either accept the entry of Harley Davidson in the share capital, though it conveyed the risk that Harley Davidson took over the whole company and the management will completely