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Medium Growth Strategy Market Entry M&A

Big Yellow Buses

#Transportation #School Bus Services
ProHub Comment

This case tests the candidate's ability to decompose a growth target ($100M) into achievable components through both organic and inorganic strategies. The key analytical skill is calculating asset utilization (2,500 buses) and matching it to new market opportunities, combined with valuation analysis of M&A targets using price/sales multiples and growth projections.

Estimated Time 15 minutes
Difficulty Medium
Source Queen's
50 / 100
Big Yellow runs a fleet of school buses, which they run by charter for several schools in the GTA. Currently, annual revenues are $200 million. However, during a recent shareholders’ meeting, the CEO promised to deliver revenue growth to $300 million during the upcoming year. Since the core business is only projected to grow at about 5%, you’ve been hired to investigate other sources of growth.

Clarifying Information

  1. We are the fastest growing company in the industry (with sales above $50 million)
  2. Customers are district school boards and some private schools and contracts are won through a competitive bidding process
  3. Assume Big Yellow cannot improve bidding strategy in any way that will push growth above 5%
  4. The company has up to $50 million that it can use for investment, but cannot spend more than this amount for any reason
  5. School buses are used from 7AM to 10AM and 2PM to 5PM on weekdays only
  6. The school year is 40 weeks long
  7. The company will charge an average of $70/hour to the school boards next year
  8. If they were to enter the senior shuttle bus industry, they could fill the remaining hours between 7AM and 5PM on weekdays at a rate of $35/hour at no extra cost (requiring no additional buses)
  9. For acquisitions, Big Yellow takes into account current and future sales multiples