Overview of Simulation
FINANCE SIMULATION: M&A IN WINE COUNTRY
DEBRIEF SLIDES
HBP PRODUCT NO. 4807
This PowerPoint presentation was prepared by Professor Timothy Luehrman for the sole purpose of aiding classroom instructors in the use of Finance Simulation: M&A in Wine
Country V2 (HBP No. 4805). HBP educational materials are developed solely as the basis for class discussion. These materials are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2013 President and Fellows of Harvard College. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business Publishing.
DOES M&A MAKE SENSE IN THIS INDUSTRY?
Traditionally fragmented industry
Distributors in the U.S. have recently become larger, more powerful
Large producers can negotiate favorable terms with distributors, or do their own
distribution
Small producers can market and sell directly to specialty retailers, restaurants, and
consumers
Medium-size producers can do neither economically
Bel Vino and Starshine both have a version of this problem
International Beverage is large and covers international markets
© 2013 HARVARD BUSINESS SCHOOL PUBLISHING
2
MEET THE PLAYERS
Bel Vino has a strong name, history, and labels . . .
But growth has been disappointing
Starshine’s creative marketing has boosted its growth . . .
But margins have been disappointing
International Beverage has been an active acquirer, exploiting its
distribution . . .
But has a reputation for overpaying
Questions for each:
Can BV growth faster with SS or with IB as a partner?
Can SS achieve better margin enhancement with BV or SS as a partner?
Can IB create more incremental value at BV or SS?
© 2013 HARVARD BUSINESS SCHOOL PUBLISHING
3
VALUATION EXERCISE: BASE CASE STOCK PRICES
You were asked to perform a DCF valuation for Bel Vino (and/or Starshine)
Based on public
DEBRIEF SLIDES
HBP PRODUCT NO. 4807
This PowerPoint presentation was prepared by Professor Timothy Luehrman for the sole purpose of aiding classroom instructors in the use of Finance Simulation: M&A in Wine
Country V2 (HBP No. 4805). HBP educational materials are developed solely as the basis for class discussion. These materials are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2013 President and Fellows of Harvard College. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business Publishing.
DOES M&A MAKE SENSE IN THIS INDUSTRY?
Traditionally fragmented industry
Distributors in the U.S. have recently become larger, more powerful
Large producers can negotiate favorable terms with distributors, or do their own
distribution
Small producers can market and sell directly to specialty retailers, restaurants, and
consumers
Medium-size producers can do neither economically
Bel Vino and Starshine both have a version of this problem
International Beverage is large and covers international markets
© 2013 HARVARD BUSINESS SCHOOL PUBLISHING
2
MEET THE PLAYERS
Bel Vino has a strong name, history, and labels . . .
But growth has been disappointing
Starshine’s creative marketing has boosted its growth . . .
But margins have been disappointing
International Beverage has been an active acquirer, exploiting its
distribution . . .
But has a reputation for overpaying
Questions for each:
Can BV growth faster with SS or with IB as a partner?
Can SS achieve better margin enhancement with BV or SS as a partner?
Can IB create more incremental value at BV or SS?
© 2013 HARVARD BUSINESS SCHOOL PUBLISHING
3
VALUATION EXERCISE: BASE CASE STOCK PRICES
You were asked to perform a DCF valuation for Bel Vino (and/or Starshine)
Based on public