P
ProHub
English 简体中文 繁體中文
Medium Merger & Acquisition Financial Analysis

Juice Manufacturer

#Consumer Goods #Agriculture
ProHub Comment

This case tests the candidate's ability to structure an M&A valuation problem, extract key financial metrics from projections, and calculate ROI correctly. The solution requires careful interpretation of financial data (net sales, COGS, SG&A) to derive operating profits, then apply the purchase price formula using the revenue multiple to determine investment basis and returns.

Estimated Time 25 minutes
Difficulty Medium
Source PeterK
10 / 100
A large dairy company, Lean Foods, would like to acquire Aunt Jen’s Organic, a juice producer. Its valuation will be based on a revenue multiple of 0.3x, given Aunt Jen’s Organic’s history of losses over several years. What 3-year ROI should Lean Foods expect from this investment?

Clarifying Information

  1. Exhibit 1. Projected Finances of Aunt Jen’s Organic, 2023-26F
  2. We’re in early 2024
  3. We can ignore taxes and interest expenses
Mock Interview
Interviewer

A large dairy company, Lean Foods, would like to acquire Aunt Jen's Organic, a juice producer. Its valuation will be based on a revenue multiple of 0.3x, given Aunt Jen's Organic's history of losses over several years. What 3-year ROI should Lean Foods expect from this investment?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

Lean Foods is considering acquiring Aunt Jen’s Organic at a 0.3x revenue multiple. Using projected financials for 2024-2026, the candidate must calculate the company’s operating profits over three years, compare this to the purchase price (0.3x 2023 revenue), and determine the resulting ROI, which yields 50%.

Key Insights:

  1. Operating profit calculation requires: Revenue × (1 - COGS% - SG&A$/Revenue)
  2. Purchase price is based on 2023 revenue multiple (0.3x × $100M = $30M)
  3. 3-year ROI = (Total Profits - Initial Investment) / Initial Investment
  4. COGS improvements are driven by economies of scale from 30% revenue growth
  5. SG&A costs remain relatively flat due to fixed cost structure
  6. Advanced candidates should contextualize the 50% return as attractive but dependent on aggressive growth and cost reduction assumptions