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Medium Merger & Acquisition Growth Strategy Profitability

LOL much?

#Electronic sports #Strategic M&A

Practice this intermediate merger & acquisition case interview question in the Electronic sports sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case tests financial analysis and strategic thinking in an unfamiliar industry by requiring candidates to build a business model for an esports club, assess market attractiveness, identify synergies with the parent company, and articulate key risks. The case combines quantitative profitability analysis (40 million RMB profit over 5 years) with strategic considerations around market trends, operational feasibility, and risk mitigation in a rapidly evolving sector.

Estimated Time 27 minutes
Difficulty Medium
Source IESE
19 / 100
Our client, SW (Sport Wear) is a famous sportswear company with 20 Billion RMB (Chinese currency) in revenue in 2020. Growth potential in the current business is limited, so SW wanted to explore other opportunities adjacent to its core business. Impressed by the prosperous e-sports in China, SW is very interest in exploring the possibilities in that area. Recently, the CEO of SW has been given an opportunity to acquire a club named Play Hard Gaming (PHG), which is one of the top teams of the PC game Lol (League of Legends) in China, at price of 45 million RMB. Just like other traditional sports, Lol now is leagued in many countries. PGH won fourth place of Lol Pro League in China last year. The CEO has hired us to determine whether this could be an attractive opportunity.

Clarifying Information

  1. Lol Pro League is the Lol league in China. It has 21 teams and just like La Liga, each team has its own stadium and plays against each other team twice a season (Home match and Away match)
  2. Lol Pro League in China started in 2015 and quickly became popular across the country. Average 50 million audiences watched each match online/offline last year.
  3. Lol (League of Legends) is the most popular multiplayer online battle arena video game, during which two teams of five players play online to battle to win.
  4. Typically, each Lol pro League club has six players and one coach.
  5. Budget for the acquisition is 45 million RMB and the CEO wants to recover investment within 5 years.
Mock Interview
Interviewer

Our client, SW (Sport Wear) is a famous sportswear company with 20 Billion RMB (Chinese currency) in revenue in 2020. Growth potential in the current business is limited, so SW wanted to explore other opportunities adjacent to its core business. Impressed by the prosperous e-sports in China, SW is very interest in exploring the possibilities in that area. Recently, the CEO of SW has been given an opportunity to acquire a club named Play Hard Gaming (PHG), which is one of the top teams of the PC game Lol (League of Legends) in China, at price of 45 million RMB. Just like other traditional sports, Lol now is leagued in many countries. PGH won fourth place of Lol Pro League in China last year. The CEO has hired us to determine whether this could be an attractive opportunity.

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
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Practice this case with AI Mock Interview

SW, a major Chinese sportswear company, is evaluating the acquisition of Play Hard Gaming (PHG), a top League of Legends esports club, for 45 million RMB to expand into the growing esports market. The analysis shows that with synergies considered, the acquisition could generate 50 million RMB in total profit and cost savings over 5 years, making it financially attractive. However, risks include the game’s life cycle uncertainty, player retention, and competitive sustainability.

Key Insights:

  1. The e-sports market in China has tripled from 2015-2021, with LoL dominating the PC segment despite mobile being the primary growth driver
  2. Financial model shows 7 million RMB annual profit plus 2 million RMB in annual synergies (advertising exposure to 50 million audiences, merchandise sales, cost optimization), yielding 50 million RMB over 5 years versus 45 million RMB investment
  3. Key risks include game life cycle uncertainty, player dependency and churn costs, competitive positioning to maintain sponsorships, and the strategic tension between acquiring a PC-based club when mobile segment is the primary growth opportunity

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