Environmental Defense Fund and the Leveraged Buyout of TXU
(7 pages of text)
Case (Pub Mat)
In 2006, the regional director for Texas’ Environmental Defense Fund (EDF) was on his way to a hearing about permits for new coal plants proposed by Texas electricity provider TXU when he received a call from private equity firm Texas Pacific Group, concerning TXU's plans to build 11 new coal-fired power plants. How could he negotiate with the private equity firm as it pursued the largest recorded leveraged buyout deal? The private equity firm was opposed to acquiring a firm embroiled in a pitched battle with environmentalists, and claimed to be willing to make substantial concessions. However, as an environmental non-government organization, EDF would face significant risks if it elected to work with TXU and private equity firms to facilitate this deal. Should EDF support the buyout, and what concessions should it ask for in return?
This case is suitable for undergraduate and graduate courses involving environmental non-government organizations (ENGOs), government regulations, and firm strategy. After completion of the case, students will be able to
- understand the delicate balance required for ENGOs to grant concessions in
significant buyout deals without losing their political integrity and public trust;
- identify the challenges and opportunities that ENGOs face as they negotiate with private equity firms; and
- assess the difficulties these ENGOs have in influencing firm strategy and government regulations during the purchase of a major electric utility firm.
United States, Large, 2006
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