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Corporate Finance Case 2 UVA
Question 1 Question 2 Question 3 Question 4 Question 4 p.3 p.4 p.10 p.11 p.12
Question 1. Should Walter Butler submit a proposal for Autodistribution? What is the nature of the opportunity?
Based on the opportunity offered by both the French and the European Autodistribution market together with the profitability improvement possibilities of AD’s business, Walter Butler should submit a proposal for AD’s business. Indeed AD’s business and the European Autodistribution market offer multiples advantages that could bring tremendous growth opportunities if they are well managed. The opportunity for Butler Capital Partners Investment can be summarize into two groups. 1. Development opportunities
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Expansion opportunities in Europe due to the fragmentation, the expected growth of the industry. Integration of affiliates or acquisition of independent wholesalers offers external growth opportunities in France. Increase in the penetration rate of AD’s central buying unit among the affiliates by setting up an efficient IT system for purchasing. Low competition on acquisitions because of the lack of players able to afford a dynamic build-up strategy Strong growth potential of the industrial supplies segment. Potential of development of fleet maintenance and agreements with insurance companies. Many e-business opportunities.
2. Profitability improvements
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Natural increase in gross margin as a result of the integration of affiliated wholesalers: for an acquisition representing 10% of revenues, the group’s gross margin increases by 1 point and the operating margin by 0.2 points. The acquisition of independent wholesalers brings an additional gross margin of 8.8%, increases the CBU's purchasing power and therefore puts more pressure on parts manufacturers’ prices. Potential of reduction of operating costs through a centralization of IT systems for purchasing and sales...