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Medium Profitability M&A

Cruise Line Acquisition

#Travel & Tourism
ProHub Comment

This is a well-structured profitability case that requires candidates to build a cost-based business model, recognize the importance of scaling fixed costs across higher passenger density, and ultimately recommend acquisition feasibility. The case tests frameworks, quantitative analysis, and the ability to drive toward a clear business answer through structured problem-solving.

Estimated Time 15 minutes
Difficulty Medium
Source Chicago Booth
50 / 100
Our client is FunCruiseLines, a major cruise line headquartered in the United States. They are currently considering acquiring a new, luxury cruise line, FSC (Fancy Small Cruises). Before doing so, they would like to determine if there is room to increase profitability of FSC. They have asked us to come to a meeting with their CFO and tell them if we think this can be done. How should we structure this case?

Clarifying Information

  1. The primary objective is to determine if it is feasible to increase profitability of the acquisition target. The goal is to move from 10% to 40% EBITDA. Do not disclose target unless asked.
  2. FSC is an all-inclusive line, with revenues of $1,000 per APCD (Available Passenger Cruise Day - this is a ‘unit revenue’ for the Cruise Line industry).
  3. Gaming (casino) revenues can be ignored.
  4. FSC (pre): $900/APCD
  5. FSC (post): $650/APCD
  6. FunCruiseLines: $200/APCD
  7. Competitor Avg: $660/APCD
  8. Itemized costs for FSC post-alignment: Corporate salaries: $10/APCD, Office rent: $5/APCD, Fuel cost: $45/APCD, Shipboard salaries: $220/APCD, Port docking fees: $50/APCD, Food & beverage: $100/APCD, Excursions: $220/APCD