贝恩咨询实习练习案例1

•Personal Care Co.

Client, Private Equity Co. (PEC), is looking to acquire Personal Care Co.

Personal Care Co. offers a diversified product line of health & beauty products into

several market segments.

PEC would like to sell the acquisition in 2-3 years for a profit.

The new management team PEC would put in place is unsure where to focus Personal

Care Co.'s growth efforts and, therefore, which segments to target with new product

launches.

PEC is asking Bain to provide guidance to help them decide to purchase this firm or not.

They also expect Bain to tell them where to focus their efforts.

Question 1 of 7

How would you go about breaking this problem down?

Think of a high-level structure you could use to guide your thought process.

Be sure to cover all the main areas that need to be considered in order to be able to fully answer the 2 key questions.

What would be the key elements of the analysis framework?

Competitive environment Personal Care growth projection Market attractiveness

Company attractiveness Legal and regulation environment Potential synergy with other companies owned by PEC

•

Question 1 of 7

Your answer

1. Competitive environment

Bain's answer

In this situation we might look to use a standard private equity due diligence framework covering market attractiveness, company attractiveness, and competitive environment. Given the fund's objectives, we should also keep in mind the feasibility of a profitable exit in 2-3 years' time.

Note: Private equity cases are typically much shorter than standard corporate cases. Teams need to be able to quickly assess the situation at a high level and then focus on the issues that have the greatest effect on the overall answer.

•

Question 2 of 7

Let's start by considering how attractive the overall market is.

The local information services department (Bain IS) has provided you with the high level market structure.

Which segments look to be the most attractive?

Please choose one or more options below.

Foot Oral Hair Face Skin

Bain's answer

Face and Skin are attractive as they are the biggest segments in the market.

Hair is also an attractive option as it presents the highest growth rate.

Focusing quickly on the most important items helps prioritize tasks and use your time in the most efficient way possible.

•

Question 3a of 7

With the help of Information Services, you have been researching recent deal activity in the market and have compiled a slide showing profit multiples paid for acquisitions of various businesses which operate in each of the market segments.

Which segment generates the highest profit multiples?

Foot Oral Hair Face Skin

Please reflect on why this matters to our private equity client in considering an acquisition. Bain's answer

The hair segment has been generating the highest profit multiples, even when controlling for market dominance (signified by a high relative market share).

Understanding the profit multiples of recent transactions is important for two main reasons:

•First, it allows the PE firm to make an assessment of a fair market price

•Second, it shows the impact on exit value that improvements in profitability might have.

In this case, improvements the PE firm can make to an acquisition's profits from the hair segment might command the greatest premium at exit.

Question 3b of 7