Tad O’ Malley: the Investment Conundrum Case Analysis

Jiaxin Qian

FINC 3345

Financial Institution and Markets

2015/10/19

Tad O’ Malley: The Investment Conundrum Case analysis

In this case, I have been asked to LBO (leveraged buyout) a company for three different options. At the beginning, I have to explain what LBO is. LBO is acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.

There are three investment options: Coming Home Funeral Service, 3FAG and Gurgaon Manufacturing, Ltd. In this essay, I will valuation each company from the following criteria: market position, growth rate and opportunities for the company, cash flow, deal size and risks.

Coming Home Funeral Service represents one of the few consolidated providers of end of life care (cemetery operation, cremation, and funeral services) in the United Kingdom. Formed when a U.S. based group purchased two funeral service firms seven years before, Coming Home was the largest operator in a fragmented market. That means Coming Home has a large market share. And it can provide a complete service chain for funeral Service. (Funeral services, cremation and cemetery operation). Coming Home is a very stable company. From 2001 to 2005, Coming Home average market share is 12.27%. And the Actual EBITDA were stable around $28.48MM. The data on the U.K. mainland death rate were very stable too. From 2001 to 2004, the growth, the death rate of U.K mainland was -3.06%. That means the industry growth is low. And this kind of enterprises will be limited by their service. Funeral services in the domestic market have already grown mature. If we invest funeral services, we don't need to take risks, but at the same time, this industry also...