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Medium Growth Revenue Growth M&A Upselling

Circle Bubble

#Industrials #Packaging Materials
ProHub Comment

This case tests the ability to interpret Pareto distribution data (80/20 rule) and identify cross-selling opportunities. The core insight is that 80% of revenue comes from only 5% of customers, making customer retention and expansion the logical growth lever when geographic and market expansion constraints exist.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
The Private Equity Fund PEGrowth has recently acquired a company called Circle, which is a company in the protective packaging space. Your consulting firm had worked on the due diligence process for this deal and now the fund wants to increase the value of the company. Due to the cost-cutting program already conducted prior to the acquisition, PEGrowth wants to focus on increasing revenue.

Clarifying Information

  1. Products/Business Model: The target, Circle is a company in the protective packaging space. Their customers include business clients in various industries. While historically, Circle focused only on providing air bubbles to serve the flexible wrap and void fill markets, 2 years ago, the company started expanding into stretch plastic packaging through an acquisition. Stretch plastic is a film, often used as kitchen protection film or around pallets to fix different layers together.
  2. Goal: PEGrowth wants to increase the revenue by at least 10% next year. The revenue in 2019 of Circle was $250M in total.
  3. Market: The market for packaging materials is characterized by the concentration of few players. The margin is low with high transport cost; therefore, the market is geographically limited around the production facilities.