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Medium M&A Private Equity Investment Decision

Entertainment Co.

#Entertainment #Media #M&A
ProHub Comment

This is a multi-layered M&A case requiring candidates to analyze financial projections, assess operational improvements, and make a strategic investment recommendation. The case tests skills in revenue/EBITDA calculations, financial modeling over a 5-year horizon, and business judgment around operational synergies and regulatory risk.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
EntertainmentCo is the world’s largest live entertainment company, with two distinct business divisions—a ticketing division and a venue management division. Due to an anticipated crackdown from federal regulators, EntertainmentCo is planning a spin-off of its ticketing division. Your client is a PE firm that is interested in investing in the spin-off. Should they do it?

Clarifying Information

  1. What are the goals of the PE firm? / What do we know about the PE firm? The firm targets EBITDA and revenue increases of 50% from the initial investment in year 1 to year 5, which is when the firm would typically exit the investment. The firm specializes in the telecommunications, media and entertainment industries. The firm is willing invest a total of $175M to improve the operations of the spin-off.
  2. What is the ticketing business doing? The ticketing division manages ticket marketing, pricing, sales, and distribution through an online platform, as well as platforms for phone and physical box offices sales. They manage inventory, provide customer support, and ensure ticket validity.
  3. What is the venue management doing? The venue management division focuses on promoting and producing live events, such as concerts, theater shows, and sports events. As the world’s largest live entertainment company, they are responsible for organizing and promoting events for a wide range of artists, performers, and teams.
  4. Why are the regulators cracking down on EntertainmentCo? Increased scrutiny in the press and entertainment media has led to antitrust concerns. All events organized through the venue management division must be sold through their proprietary ticketing platform, weakening competition.