Centerbridge Partners and Great Wolf Resorts: Buying from a Highly Regarded Competitor

By: Josh Lerner and Amram Migdal and John Dionne

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Synopsis: The case examines the March 2015 Centerbridge Partners investment decision regarding whether to acquire Great Wolf Resorts, a North American family-oriented indoor water parks and hotel operator, from a private equity (PE) competitor, Apollo Global Management. The case allows for discussion of strategic and financing considerations by Centerbridge, a New York-based investment firm employing a flexible approach across investment disciplines: private equity (PE); credit, distressed strategies, and special situations; and real estate. Students are presented the opportunity to perform valuation analysis and compare two possible forms of financing for the potential acquisition: 1) traditional corporate debt and bond financing and 2) commercial mortgage-backed security (CMBS) financing. Strategically, the case poses the questions: Was Centerbridge valuing Great Wolf correctly? Would CMBS be the optimal financing structure, and why had no other firm contemplated this type of financing? Would the company, in partnership with Centerbridge, be able to execute on operational improvements and growth strategy? Was the purchase price multiple of 9.4x warranted in light of the opportunity set? Would an established PE firm like Apollo ever leave enough on the table for a successor private-equity owner to generate gains without necessary multiple expansion?