Spice Up Your Life
Practice this intermediate merger & acquisition case interview question in the Private Equity, Food/Retail sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.
This case tests quantitative skills and organizational ability by requiring candidates to compare multiple exhibits to identify cost optimization opportunities and build a valuation model. Strong candidates will recognize that Favored Flavors underperforms industry benchmarks on COGS and packaging costs, calculate potential savings, and use these improvements to project future cash flows and terminal value. The case emphasizes both analytical rigor and attention to detail in tracking assumptions across exhibits.
Clarifying Information
- Financial Targets: SI seeks a Multiple of Invested Capital (MOIC) of 2x (i.e. it seeks to earn double the value of its investment by the end of the holding period). MOIC does not involve time value of money, so a discounted cash flow analysis is not needed.
- The fund has a holding period of 4 years, at which point the fund will sell the business. SI is confident that they will be able to sell the business at 10x EBITDA.
- FF does not have any debt.
- FF sells primarily to grocery store wholesalers (not an important part of this case).
- A couple SI managing directors have significant experience in this industry, but SI does not currently have any other portfolio companies in the food/beverage market.