Ladym

Corporate Finance- Prf. V. Balashov

Team Members: Jong Halstead, Kim Miller, Sandy Whittaker

Due date: 12/18/2015.

Discussion Report for the valuation and financing of Lady M Confections.

Summary:

The management team for Lady M Confections are faced with tremendous opportunities to grow their mom and pop cake shop operation into multinational fast growing company. Their cake operation started in 2001, as a cake wholesale business which sold cakes to upscale restaurants and luxury hotels in NY City. They opened its first boutique shop in 2004, and received a numerous accolade on their aesthetically pleasing cakes were influenced by the French and the Japanese baking principles.

After an initial success with their first boutique cake shop, the management team opened several cake shops in NY City, and LA within a couple of years and experienced considerable double digits growth in sales and net profit margins. Lady M’s CEO and CFO looked into opening an additional shop in World Trade Center as a flagship store where it can generate revenue from small individual slice sales to whole cake sales. The cost of new boutique shop in WTC was considerably expensive compared their other locations, and the sales forecast for WTC was comparable to Bryant Park location as a benchmark. The management team needed to decide whether to expand their shop and to consider an offer from a foreign investor who offered $10M as a line of credit with equity sales with exclusive franchising rights in China.

Analysis:

Conclusion:

Lady M could benefit from foreign investor’s offer initially by easing up the pressure of cash flow issues with business expansion, inflation and other unforeseen market changes, however the giving up the franchising rights could be detrimental in long term business perspective. Lady M could maintain current locations to concentrate on growth of sales and net profit margins without sacrificing