Calvaras Study

Calaveras Vineyards

Calaveras Vineyard, a family-owned business, was established in 1883 and had experienced some changes in the ownership structure and improvements in its brand quality and market position throughout the years. Calaveras vineyard, most recently acquired by Stout PLC which is a British conglomerate, is targeted to be purchased by Dr. Lynna Marinez and Peter Newsome; they planned to rebuild their acquisitions with new strategies and to position premium wine market. Based on a set of assumptions which include historically optimistic sales trend, the company’s future performance is also expected to be optimistic.

Goldengate Capital, the third largest financial institution in the U.S., recently received a proposal from NationBank regarding the prospective management acquisition of Calaveras Vineyard and $4.5 million senior financing for purchase of the projected acquisition. Goldenfate Capital noticed the fact that wine industry has significantly been grown (7.4% in 1992) compared to beer market (2.2% in 1992) over the periods and that quality wine segment was a crucial driver of its growth. On the other hand, a problem is that Calaveras was a small size vineyard so it was hard to find appropriate comparable to evaluate the value of its investment opportunity. Goldengate Capital needed a further 

analysis to decide if the company jump into this investment opportunity by reviewing Calarveras’s proforma financial statement. Calaveras Future sales were projected based on a set of assumptions which include historically optimistic sales trend and pro forma financial statements. Calaveras sales are projected to consistently grow, 9% on average, over next five fiscal years and this growth is expected to be derived from increase in demand on wine products, increase in real prices of products reflecting Calaveras expected strong brand power, and increase in productivity on grape cultivation and yield per acre

Moreover, US consumers preferences are...