Dogloo and Opportunity Capital Partners

Lewis Byrd, a partner in the private equity firm Opportunity Capital Partners, is managing a number of interconnected issues. First, in his role as investment professional responsible for the firm's investment in a doghouse manufacturing company called Dogloo, he has to manage a relationship with an entrepreneur who has behaved in a way that has made coinvestors nervous about his skills as a CEO. The CEO, Aurelio Barretto, is a Cuban immigrant who has established a close confiding relationship with Byrd, who is an African American. Barretto has increasingly relied on Byrd to run interference for him with investors, while also providing the strategic advice that typically supports an investor-entrepreneur relationship. Another issue is that there is a potentially costly lawsuit looming involving copyright infringement by a larger, well-funded competitor in the pet products market. Byrd has to manage potentially volatile relationships while determining what's best for his firm from an investment standpoint and how best to advise Barretto to proceed. The case provides insights into the challenges in private equity investing that occur after the striking of the financial deal. The case also provides information for students about the technical and legal structure of private equity financing. Excerpt UVA-ENT-0057 Rev. Feb. 11, 2013 DOGLOO and Opportunity Capital Partners On the rainy afternoon of April 27, 1995, with his young son waiting anxiously in a rental car, Lewis Byrd stood in a Washington, DC, phone booth conversing with Aurelio Barreto, CEO of Dogloo, Inc. What had started out as a relaxing vacation had turned into serious work. Barreto told Byrd, a vice president at Opportunity Capital Partners (OCP), that the June 1994 lawsuit Dogloo filed against Doskocil—the largest producer of plastic pet carriers in the country—was becoming a serious concern. The charge asserted that Doskocil had infringed on Dogloo's patented igloo shape configuration—a form that was clearly evident in its best-selling doghouse, Dome Home. Earlier in the month, a judge had issued a preliminary injunction prohibiting Doskocil from continuing to sell the Dome Home until a final verdict had been reached (see Exhibit 1 for excerpts from the actual injunction). This action brought temporary relief, but not much: the suit had already consumed a large amount of cash. Moreover, Doskocil had decided to file a counter-claim against Dogloo, and a quick and painless resolution now seemed unlikely. Byrd knew he had two challenges: first, to determine how to manage in spite of the distracting legal issues; and second, to provide the counsel and support Dogloo's CEO needed. . . .