The acquisition of a company involves several significant steps that one must assess in order not to fail and lose money in the process. This is the case of David Kuchen, a 30 year-old graduate from a top MBA school, who is looking for a business to acquire or some other related opportunity. He aims to become a senior manager with equity in a small business. He focused his research on light manufacturing, service and distribution companies. These are small companies that don't require too much specialized knowledge. Additionally, he has some specific requirement for his business. He wants to avoid businesses with less than $2 million in sales, own 20 percent of the business over time, receive a $100,000 annual salary, acquire a business with at least $500,000 in EBITDA, and has a good middle management and/or an owner willing to complete a proper transition to a new inexperienced manager. He prefers the head office to be located in or near the Great Toronto Area that offers a few solid growth opportunities. Finally, he discovered Cake Masters, a commercial bakery specializing in high-end dessert items, based in Ontario.
[...] She is well- known for her innovative products that are low in fat and taste exceptionally good. She is a real competitive advantage for the company. - Cake Master has developed close relationships with few key suppliers, which may constitute as a good competitive advantage. When you have a close relation with your suppliers, you can benefit by some favors. - The upscale restaurant chain Franco's is the most important customer of Cake Masters; indeed it represents almost two-third of Cake Master's sales. [...]
[...] Through his MBA program and his experience, David Kuchen has developed a network of potential investors and advisors, who will be helpful to find, acquire and operate a business. Weaknesses: Kuchen has already run a small business but he has no experience in managing a large business. Indeed, Cake Master is a company of 54 employees, so if has no experience in that it will be difficult for him to manage all these people. He wants to acquire a business but he has no money to invest, he has to find investors and convince them to invest in his business, and it is not an easy thing to do. [...]
[...] o Technological environment - Equipments are now much more efficient and faster. Baking equipments last for many years. II. Financial analysis Balance sheet (see appendix A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point of time. It gives investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. It can identify the potential liquidity problems of a business. With the help of the balance sheet, a new investor can look at the degree to which a company is leveraged or indebted. [...]
[...] Indeed, factoring out interest, taxes, depreciation and amortization can make even completely unprofitable firms appear to be monetarily strong. Moreover, EBITDA numbers are easy to manipulate. If fraudulent accounting techniques are used to inflate revenues and interest, taxes, depreciation and amortization are factored out of the equation, and any company will look great. That is why, operating cash flow is a better measure of how much cash a company is generating because it adds non-cash charges (depreciation and amortization) back to net income and includes the changes in working capital that also use/provide cash (such as changes in receivables, payables and inventories). [...]
[...] Looking at the quick ratio we can say: Quick ratio= current assets inventories Current liabilities = 1646- = 2.68 It means that the company has enough cash and liquid assets to cover its short-term debt obligations. In the past four years the financial health of the company has been getting better year by year. Income statement (see appendix The income statement shows how much revenue and profit a company has generated over a certain period, and it gives the potential of return on investment to shareholders. [...]
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