Kitty Hawk Merger Case

This case study involves the merger of two air freight companies.  The merger had a fairly complex structure; it was highly leveraged; a larger near bankrupt company was purchased by a smaller company; there were control issues; and, assessing the pricing and margins in the highly competitive air freight business from historic financial data was difficult if not impossible.


Overview of Kitty Hawk Merger Case Study

Kitty Hawk is a good example of evaluating a merger case. Prior to the merger, the company was a Wall Street star. It bought a company that was bigger than itself and had the arrogant idea that it could fix problems for a company that had different types of planes. The manner in which the analysts did not think about potential volatility in prices and revenues is a good example of how mistakes can be made.

You can download some of the analyst reports that describe the business and tout the expected future performance of Kitty Hawk.


Structure of the Merger

The merger had to:

– Make sure that Kitty Hawk’s Tom Chistopher maintained control

– Get cash from somewhere other than Tom Christopher to pay off Kalitta

– Allow Kalitta to have minority shares in the new company

This was accomplished by:

  • A lot of Debt
  • Paying Kalitta some cash
  • Giving Kalitta a share of the new company


Exchange Offer in Merger.txt


Modelling of the Merger


Failure of the Merger