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William Blair Case Competition

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• Created an operating model, comparable company analysis, and DCF analysis to determine valuation
• Collaborated as a team of three freshman to propose our valuation range via PowerPoint

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William Blair Case Competition

  1. 1. William Blair & Co. 2014 Case Competition Skipper’s Sporting Goods Jason Bergana | Kari Fitzpatrick | Nicholas Kane | Nicolae Sadovnic
  2. 2. 2 Agenda Bergana | Fitzpatrick | Kane | Sadovnic Page 3 : Company & Industry Overview Page 8 : Valuation Page 12: Strategic Options Page 16: Appendix
  3. 3. 3Bergana | Fitzpatrick | Kane | Sadovnic Company & Industry Overview
  4. 4. 4 Financial Summary & Company Overview Bergana | Fitzpatrick | Kane | Sadovnic  Skippers Sporting Goods is a sporting goods manufacturer  Manufactures goods for Lacrosse, Football, Baseball, and Soccer  Increasing domestic manufacturing in response to rising international costs  Maintains loyal customer base reliant on high quality goods  Recognized as the #1 brand for athletes by the National design, durability, and build
  5. 5. 5 Company Summary Bergana | Fitzpatrick | Kane | Sadovnic  Skipper’s Sporting Goods is positioned well in a fragmented industry with low competitive concentration  Projected revenue outlook poised for future growth  Recent years have shown positive revenue growth and major entrepreneurial expansions  An indication of responsiveness towards growing market trends (I.E. expanding to manufacture soccer and lacrosse gear)  Skipper’s represents 2 of the largest sports markets in the U.S. in Football and Baseball, as well as representing the 2 fastest growing U.S. sports markets in Soccer and Lacrosse
  6. 6. 6 Key External Drivers Bergana | Fitzpatrick | Kane | Sadovnic  U.S. Participation in Sports  Expected to increase slowly  Could increase manufacturing demands  Soccer and Lacrosse Participation  Both are the largest growing sports in the U.S.  Demands for Soccer and Lacrosse equipment will increase  Demand From Department Stores  Sporting Department Stores will increase demand for manufactured sporting goods as a result of an increase in athletic participation U.S. Participation in Sports Expected to increase slowly Could increase manufacturing demands
  7. 7. 7 SWOT Analysis Bergana | Fitzpatrick | Kane | Sadovnic Strengths Consistent cash flow and operating performance Favorable Gross Profit/EBITDA Margins Premium Brand Recognition with strategic relationships in industry  Considered “must have” brands for retail partners Experienced management team looking to stay on with company post transaction Weaknesses High capital expenditures and R&D required to maintain growth Customer concentration with top customer representing 36.5% of 2014E Gross Sales High levels of accounts receivable Core Segment Sales CAGR decreasing Opportunities Continue to grow Secondary divisions of business (soccer and lacrosse) Growth through potential acquisitions of other manufacturers Increased development of helmets in response to increased levels of attention surrounding concussions and head injuries Grow international and Consumer/Team Direct Channels Threats Manufacturing and transportation costs increasing Competition due to low barriers of entry; a lot of players in the industry Being bought by other major players
  8. 8. 8Bergana | Fitzpatrick | Kane | Sadovnic Valuation
  9. 9. 9 Valuation Summary Bergana | Fitzpatrick | Kane | Sadovnic Football Field Analysis Football Field Overview  We utilized a combination of intrinsic and relative valuation strategies to establish potential ranges for enterprise value  Intrinsic value: Dependent on future rates affecting revenue and financial performance  Relative value: Implied EV/EBITDA: 17.4x-18.4x
  10. 10. Comparable Companies Analysis Bergana | Fitzpatrick | Kane | Sadovnic Valuation Overview  Comparable Companies chosen for the following reasons:  Size in relation to Skipper’s  Manufacturing similarities  Similarities in capital structure and market specificities  Resulted in an Implied Enterprise value range of $1,415.05 to 1,496.29 10
  11. 11. Discounted Cash Flow Analysis Bergana | Fitzpatrick | Kane | Sadovnic 11
  12. 12. Bergana | Fitzpatrick | Kane | Sadovnic Strategic Options 12
  13. 13. Potential Strategic Buyers Bergana | Fitzpatrick | Kane | Sadovnic Nike Alina Bauer Adidas Mizuno  Major international player always seeking competitive advantages with strong consumer reach and revenue growth  Large manufacturer of soccer products with major presence in international markets  Niche manufacturer of Hockey equipment now looking to make further expansions  Relevant Acquisition: Easton Bell baseball equipment manufacturer (2014)  Large domestic and international market stake amongst baseball, soccer, and football equipment  Relevant Acquisition: Reebok (2006)  Major baseball equipment manufacturer with loyal customer- base and expansive capabilities  Relevant Acquisition: Duckhwa Sports Co Ltd.(2013) 13
  14. 14. Potential Buyers Bergana | Fitzpatrick | Kane | Sadovnic  Major brand manager company owning many notable manufacturers including Umbro, a primary soccer equipment manufacturer.  Growing licensing group with holdings in sports manufacturing groups including AND1, Avia, and Nevados.  Enormous investment group with a broad platform including relevant sports industry holdings such as Sports Authority  Large private equity firm with diverse portfolio involving sports holdings such as Big 5 Sporting Goods Leonard Green & Partners Bain Capital Sequential Brands Iconix 14
  15. 15. Conclusion Bergana | Fitzpatrick | Kane | Sadovnic  With our high growth in soccer and lacrosse products, DCF provides high valuations Discounted Cash Flow  Determined with both the Terminal Value and Implied Enterprise Value method Comparable Companies  Skippers Sporting Goods was compared against similar businesses in comparison  Compared companies on the basis of business plan and capital structures  Used to determine present and future positive yield amongst competitors Final Statements  Utilized qualitative evaluation to determine investment appeal including industry and company analysis  Quantitative valuation established in order to gauge future potential  Overall evaluation determined Skipper’s Sporting Goods to have strong investment outlook in terms of future revenue potential and competitive capacity 15
  16. 16. Bergana | Fitzpatrick | Kane | Sadovnic Appendix 16
  17. 17. 17 Weighted Average Cost of Capital Bergana | Fitzpatrick | Kane | Sadovnic  Cost of Debt: amounts of interest due to all debt  Cost of Equity: costs to maintain all equity  Size Premium: amount of interest based on size  Perpetuity Growth: constant instant rate given to determine Terminal Value  WACC: sum of formulas mentioned above Explanation

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