P
ProHub
English 简体中文 繁體中文
Medium Investment Decision M&A

Bike Helmets

#Private Equity #Manufacturing
ProHub Comment

This case tests market sizing and valuation capabilities in a mature industry context. Candidates must balance quantitative analysis (calculating market size, determining acquisition price using comparables) with qualitative judgment about whether an investment meets the PE firm's return hurdle despite lower growth prospects. The case also introduces synergy considerations that reward candidates who think beyond standalone company value.

Estimated Time 15 minutes
Difficulty Medium
Source NYU
50 / 100
Your client is a private equity firm considering purchasing a firm that makes bicycle helmets. You have been hired to help advise whether or not to make the acquisition.

Clarifying Information

TARGET COMPANY:

  1. The company only sells its products in the U.S.
  2. The company currently has an estimated market share of 60% of helmets sold in the U.S.
  3. The company has had a string of ineffective CEOs
  4. The company’s helmets have an average price of $30
  5. Helmet prices are not expected to change in the future.
  6. If candidate asks about acquisition price, tell them they will get that information later

MARKET: 7. The market is mature with few new entrants 8. U.S. regulations require all riders under the age of 18 to wear a helmet

PE FIRM: 9. Holds companies for an average of 7 years 10. Has an return target of 10%/year 11. Also owns a bicycle manufacturer (possible synergies unknown)