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Hard Merger & Acquisition Profitability

Apache Helicopter

#Manufacturing #Aerospace & Defense
ProHub Comment

This case requires rigorous quantitative analysis combined with qualitative risk assessment. The candidate must structure demand analysis by location, perform detailed cost-benefit calculations across three options, and ultimately make a recommendation based on a narrow profit differential (3% difference between US and Brazil). The case rewards candidates who can articulate assumptions, calculate total profitability accurately, and synthesize financial and strategic risks.

Estimated Time 36 minutes
Difficulty Hard
Source Chicago Booth
10 / 100

Our client is a US defense contractor. One of its divisions manufactures Apache helicopters for military operations. The company is considering setting up a new plant to meet increasing demand in the attack helicopter space. The client is considering three sites for the new plant – Brazil, France, and the US. They have hired us to help them answer the following two questions:

  1. How would you determine the parameters for the decision?
  2. Where should they set up the plant?

Clarifying Information

  1. The client has 3 plants in the US; 2 in Kansas and 1 in Michigan.
  2. The plants operate at full capacity today.
  3. One of the US plants can accommodate an additional assembly line at the cost of $500M; the other 2 are constrained in residential areas and cannot be expanded.
  4. This is the only defense contractor that sells Apache helicopters.
  5. They will only be selling to Brazil, France, or the US.
  6. This is the first time that they sell to Brazil or France.
  7. Defense budget for the next five years: $100B (US), $15B (BR), $10B (FR)
  8. Countries will dedicate a certain percentage of their defense budget to be spent on Apache helicopters based on the location of the plant.
  9. Initial plant set-up costs: US: $500M, Brazil: $2B, France: $3B
  10. Fixed costs per year: US: $100M, Brazil: $100M, France: $100M
  11. Variable cost of production: US: $15M, Brazil: $20M, France: $25M
  12. If helicopters are shipped into the US, then the US Govt. requires them to be certified; the certification process is $15M per chopper.
  13. The helicopters sell for $100M a piece.
Mock Interview
Interviewer

Our client is a US defense contractor. One of its divisions manufactures Apache helicopters for military operations. The company is considering setting up a new plant to meet increasing demand in the attack helicopter space. The client is considering three sites for the new plant – Brazil, France, and the US. They have hired us to help them answer the following two questions: 1) How would you determine the parameters for the decision? 2) Where should they set up the plant?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

A US defense contractor manufacturing Apache helicopters must decide whether to build a new plant in Brazil, France, or the US to meet increasing demand. Using defense budget allocations and detailed cost structures, candidates must calculate profitability by location and recommend the optimal site while accounting for political, currency, labor, and quality risks.

Key Insights:

  1. Framework-driven analysis is critical: candidates should structure the decision around demand characteristics, facility capabilities, and profitability metrics
  2. Quantitative rigor matters: accurate calculation of revenue (by units and pricing), fixed costs, variable costs, and import certification costs determines the recommendation
  3. Risk analysis drives final decision: with Brazil showing 3% higher profit ($16.5B vs $16B), qualitative factors like political stability, existing US operations, and currency risk become differentiators
  4. Brazil appears optimal financially (Plant in Brazil: $27.5B revenue vs $4B US setup + $3B import costs = $16.5B profit) but US wins on risk-adjusted basis
  5. Candidates should not select France as it has lowest profit ($12.25B) due to higher setup costs ($3B) and lower demand ($5B from France alone)