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    Atherine S Onfectionery

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    Vanshika Singh
    Catherine's Confectionery is a luxury confectionery company owned by the Taylor family and private equity firm ECH Capital. The company is evaluating strategic options as ECH Capital looks to exit its investment. Financial statements and analyses of comparable transaction multiples are presented to help assess the company's valuation in preparation for an upcoming meeting.

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    Atherine S Onfectionery

    Uploaded by

    Vanshika Singh
    22 views3 pages
    Catherine's Confectionery is a luxury confectionery company owned by the Taylor family and private equity firm ECH Capital. The company is evaluating strategic options as ECH Capital looks to exit its investment. Financial statements and analyses of comparable transaction multiples are presented to help assess the company's valuation in preparation for an upcoming meeting.

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    Catherine's Confectionery is a luxury confectionery company owned by the Taylor family and private equity firm ECH Capital. The company is evaluating strategic options as ECH Capital looks to exit its investment. Financial statements and analyses of comparable transaction multiples are presented to help assess the company's valuation in preparation for an upcoming meeting.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views3 pages

    Atherine S Onfectionery

    Uploaded by

    Vanshika Singh
    Catherine's Confectionery is a luxury confectionery company owned by the Taylor family and private equity firm ECH Capital. The company is evaluating strategic options as ECH Capital looks to exit its investment. Financial statements and analyses of comparable transaction multiples are presented to help assess the company's valuation in preparation for an upcoming meeting.

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    CATHERINE'S CONFECTIONERY

    _____________________________________________________________
    Catherine's Confectionery, founded in 1990 by the Taylor family, manufactures, markets
    and distributes gourmet sweets. Catherine's Confectionery sells its products in its own
    luxury boutiques and in high-end department stores in Europe, competing with such well-
    known global brands as Godiva and La Maison du Chocolat. As a result of several small
    acquisitions, Catherine's Confectionery has enjoyed top-line growth as well as improving
    margins.

    Catherine's Confectionery is a privately-held company with the family holding 25% of


    the equity. ECH Capital, a private equity firm, owns 35% after investing €20 mln in the
    company five years ago (2017) to help fund the company's growth, organically and
    potentially through additional acquisitions. The remaining shares are held by an
    employee pension fund.

    Theresa Taylor, CEO of Catherine's Confectionery, approached a global investment bank


    for help in determining strategic options for the company as ECH Capital would like to
    monetize its investment.

    Theresa Taylor sends the attached financial statements from the company’s internal
    model (Exhibits A and B) to you, and she mentions in her email that “the depreciation
    expense for 2019 may need to be increased substantially. Our accountants are evaluating
    this and we will revert shortly.”

    As the investment bank Associate on the account, you begin collecting and analyzing
    information in preparation for an upcoming meeting with ECH Capital.

    Your team prepares a comparable transactions analysis, which evaluates M&A in the
    sector, and a trading comparables analysis, as shown in Exhibits C and D.

    1
    CATHERINE'S CONFECTIONERY
    _____________________________________________________________

    EXHIBIT A. SUMMARY INCOME STATEMENT AND PROJECTIONS


    (€ in millions) Years Ending December 31,
    2016 2017 2018 2019 2020 2021 2022E

    Revenues €375.0 €395.0 €415.0 €435.0 €455.0 €475.5 €496.9


    % Growth 7.1% 5.3% 5.1% 4.8% 4.6% 4.5% 4.5%

    COGS 245.0 255.0 265.0 275.0 280.0 292.6 305.8


    Gross Profit 130.0 140.0 150.0 160.0 175.0 182.9 191.1
    % Margin 34.7% 35.4% 36.1% 36.8% 38.5% 38.5% 38.5%

    SG&A (excl Depr and Amort) 105.0 110.0 115.0 120.0 130.0 133.4 136.9
    Depreciation 9.5 10.0 10.5 11.0 11.5 12.0 12.6
    % of Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
    Amortization 3.3 1.5 1.5 1.5 1.5 1.5 1.5
    % of Sales 0.9% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3%

    EBIT 25.0 30.0 35.0 40.0 45.0 49.5 54.2


    % Margin 6.7% 7.6% 8.4% 9.2% 9.9% 10.4% 10.9%

    Interest Expense
    Revolving Credit Facility @ 4.50% 2.3 2.0 1.4 0.8 0.2 0.0 0.0
    Bank Term Loan @ 6.00% 6.6 6.3 6.0 6.0 5.6 4.4 2.8
    Total Interest Expense 8.9 8.3 7.4 6.8 5.8 4.4 2.8
    Interest Income @ 2.00% 0.5 0.4 0.4 0.4 0.4 0.4 0.4
    Net Interest Expense/(Income) 8.4 7.9 7.0 6.4 5.4 4.0 2.4

    Earnings Before Taxes 16.7 22.1 28.0 33.6 39.6 45.4 51.8
    Provision for Income Taxes 6.3 8.4 10.6 12.8 15.0 17.3 19.7
    Net Income €10.3 €13.7 €17.3 €20.8 €24.5 €28.2 €32.1
    % Margin 2.8% 3.5% 4.2% 4.8% 5.4% 5.9% 6.5%

    EBITDA 37.8 41.5 47.0 52.5 58.0 63.0 68.3


    % Margin 10.1% 10.5% 11.3% 12.1% 12.7% 13.2% 13.7%
    CapEx 15.0 16.0 18.0 22.0 18.0 18.8 19.7
    % of Sales 4.0% 4.1% 4.3% 5.1% 4.0% 4.0% 4.0%

    EXHIBIT B. SUMMARY BALANCE SHEET AND PROJECTIONS


    (€ in millions) Years Ending December 31,
    2016 2017 2018 2019 2020 2021 2022E

    Cash €25.0 €20.0 €20.0 €20.0 €20.0 €20.0 €20.0


    Accounts Receivable 60.0 55.8 56.3 56.6 56.8 56.7 59.3
    Inventory 42.0 42.3 42.5 42.6 41.9 42.1 44.0
    Total Current Assets 127.0 118.1 118.8 119.3 118.6 118.9 123.3

    Plant, Property and Equipment (Net) 215.0 221.0 228.5 239.5 246.0 252.8 259.9
    Goodwill 57.0 55.5 54.0 52.5 51.0 49.5 48.0
    Total Assets 399.0 394.6 401.3 411.3 415.6 421.1 431.2

    Accounts Payable 47.0 50.3 53.7 57.3 59.9 64.1 67.0


    Current Portion of Bank Term Loan 10.0 0.0 0.0 0.0 0.0 0.0 0.0
    Total Current Liabilities 57.0 50.3 53.7 57.3 59.9 64.1 67.0

    Other Liabilities 30.0 30.0 30.0 30.0 30.0 30.0 30.0

    Revolving Credit Facility 50.0 38.6 24.5 10.1 0.0 0.0 0.0
    Bank Term Loan 100.0 100.0 100.0 100.0 87.4 60.4 34.5
    Total Long-Term Debt 150.0 138.6 124.5 110.1 87.4 60.4 34.5

    Shareholders' Equity 162.0 175.7 193.1 213.9 238.4 266.6 298.7

    Total Liabilities and Equity 399.0 394.6 401.3 411.3 415.6 421.1 431.2

    2
    CATHERINE'S CONFECTIONERY
    _____________________________________________________________

    EXHIBIT C. COMPARABLE TRANSACTIONS ANALYSIS


    (€ in millions) Equity Value
    as a Multiple of:
    Equity Enterprise Enterprise Value as a Multiple of: Net Book
    Acquirer Target Value Value Sales EBITDA EBIT Income Value

    Company A Company V €142.9 €155.2 1.06x 10.2x 16.2x 25.8x 4.57x


    Company B Company U 765.0 765.0 2.30x 12.0x NA NA NA
    Company C Company T 131.6 145.0 0.80x 8.2x 15.0x 14.1x 3.49x
    Company D Company S 119.0 167.1 1.60x 8.0x 10.4x 14.8x 1.23x
    Company E Company R 1,747.4 1,797.3 2.90x 15.0x 19.0x 27.0x 5.24x
    Company F Company Q 58.8 78.3 2.85x 12.0x 17.4x NM NA
    Company G Company P 610.0 610.0 0.98x 10.9x NA NA NA
    Company H Company O 26.0 26.5 1.15x 9.1x 11.7x 19.7x 2.87x
    Company I Company N 121.1 144.3 1.49x 11.3x 14.3x 24.3x 7.52x
    Company J Company M 640.4 640.4 1.49x 11.0x NA NA 5.83x
    Company K Company L 253.4 306.5 1.64x 11.8x 15.4x NA 2.05x

    Mean 1.66x 10.9x 14.9x 21.0x 4.10x


    Median 1.49x 11.0x 15.2x 22.0x 4.03x
    High 2.90x 15.0x 19.0x 27.0x 7.52x
    Low 0.80x 8.0x 10.4x 14.1x 1.23x

    EXHIBIT D. TRADING COMPARABLES ANALYSIS


    (€ in millions)
    Equity Enterprise Enterprise Value to LTM Price to Price to Net Debt/
    Company Value Value Sales EBITDA EBIT LTM EPS 2022E EPS Book Value EBITDA

    Company 1 €70.7 €87.3 0.54x 6.3x 13.2x 16.7x 20.8x 1.3x 1.2x
    Company 2 629.4 868.9 0.53x 7.0x 17.7x 41.4x 17.4x 1.2x 2.0x
    Company 3 86.4 140.1 0.40x 5.2x 7.7x 10.6x 9.3x 0.9x 2.0x
    Company 4 328.7 314.7 0.89x 5.4x 11.1x 18.1x 15.1x 2.7x 0.0x
    Company 5 1,023.6 1,608.9 0.45x 6.0x 9.3x 13.2x 10.9x NM 2.2x
    Company 6 324.2 365.8 0.67x 5.3x 9.1x 14.0x 16.6x 2.4x 0.6x
    Company 7 732.7 894.2 0.70x 7.1x 10.0x 14.0x NA 4.0x 1.3x

    Mean 0.60x 6.0x 11.1x 18.3x 15.0x 2.1x 1.3x


    Median 0.54x 6.0x 10.0x 14.0x 15.8x 1.9x 1.3x
    High 0.89x 7.1x 17.7x 41.4x 20.8x 4.0x 2.2x
    Low 0.40x 5.2x 7.7x 10.6x 9.3x 0.9x 0.0x

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