Spice Up Your Life
Practice this intermediate merger & acquisition case interview question in the PE & 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 analysis skills by requiring candidates to analyze financial statements, identify cost optimization opportunities, and calculate forward-looking valuations using a MOIC framework. The case structure guides candidates through progressive complexity—starting with profitability comparison, moving to product-level cost analysis, and culminating in a multi-year cash flow projection and terminal value calculation. Success requires both analytical rigor and organizational skills to track multiple data points across exhibits.
Our client, Seasoned Investors (SI), is a private equity firm that has just launched a new fund focused on investments in the food industry. For their first investment, they are considering acquiring Favored Flavors (FF), a spice company specializing in premium organic spices.
Favored Flavors is asking for $75M, and the offer is final. Should Seasoned Investors pursue this acquisition?
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).
- 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.