2. Our Team
Liam Bryson
Class of 2019
Finance & Catholic
Social Tradition
O’Neill Hall
Owen Donnelly
Class of 2021
Finance & ACMS
Fisher Hall
Yuchen Zou
Class of 2018
Economics & ACMS
Off campus & Farley Hall
Liam Li
Class of 2020
Finance & ACMS
Knott Hall
Sean O’Brien
Class of 2020
Finance
Keough Hall
Pat Iannelli
Class of 2021
Finance & Political
Science
O’Neill Hall
Ben Shepard
Class of 2020
Finance & ACMS &
Studio Art
Stanford Hall
Mary Treacy
Class of 2021
Finance & ACMS
Breen-Phillips Hall
Max Perry
Class of 2021
Finance
Knott Hall
Wenyi Wu
Class of 2021
Finance & ACMS
Ryan Hall
Brian Zenni
Class of 2020
Finance & Political
Science
Sorin College
Miles Wood
Class of 2020
Finance & ACMS
Duncan Hall
2
3. Table of Contents
Transaction Overview, Exit & Returns, Outlook & RecommendationExecutive Summary
Overview, Trends, Competition, Five Forces, Success & Risk FactorsIndustry Overview
Overview, Management, Margins, Stock Chart, Growth StrategiesCompany Analysis
LBO Environment and RationaleStrategic Rationale
Comps, Precedents, Assumptions, Output, Football FieldValuation & LBO Output
Recommend acquiring Buffalo Wild Wings at $143.30 per shareInvestment Thesis
S&U, Team Case, Rev. Build, Debt Schedule, PF Balance Sheet, and DCFAppendix
3
4. Executive Summary
Transaction Overview Exit & Returns
Outlook & Recommendation
Purchase Price 11.00x
Revolver Capacity 0.25x
Term Loan A 4.00x
Term Loan B 1.75x
2017E EBITDA $263M
Buyout Share Price $160.16
Implied Enterprise Value at Entry $2,858M
Investment Time Horizon 5 years
Exit Multiple 9.0x
Acquiring
BWLD
International Expansion
Franchising Focus
Improving Margins
Due to Buffalo Wild Wings’ ability to improve margins, franchising, and expansion, we recommend moving forward with an acquisition of BWW
4
2018P 2019P 2020P 2021P 2022P
Full Yr. Full Yr. Full Yr. Full Yr. Full Yr.
LTM EBITDA 309.0$ 334.8$ 364.5$ 394.1$ 427.8$
(x)Exit Multiple 9.0x 9.0x 9.0x 9.0x 9.0x
TEV 2,781.4$ 3,013.3$ 3,280.9$ 3,546.7$ 3,850.3$
(-) Debt (1,421.0)$ (1,250.3)$ (1,059.3)$ (848.5)$ (614.3)$
(+) Cash 15.0 15.0 15.0 15.0 15.0
Gross Equity Value 1,375.5$ 1,778.0$ 2,236.5$ 2,713.2$ 3,250.9$
(-) Preferred Return (1,375.5)$ (1,663.3)$ (1,829.6)$ (2,012.6)$ (2,213.9)$
Common Equity Value -$ 114.7$ 406.9$ 700.6$ 1,037.0$
GTCR Returns:
GTCR Preferred 1,375.5$ 1,663.3$ 1,829.6$ 2,012.6$ 2,213.9$
GTCR Common - 106.1 376.4 648.0 959.3
GTCR Total Return 1,375.5$ 1,769.4$ 2,206.0$ 2,660.6$ 3,173.1$
12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022
Capital Flows: @Close 2018P 2019P 2020P 2021P 2022P
2017P (1,374.6)$ 1,375.5$
2018P (1,374.6) 1,769.4$
2019P (1,374.6) 2,206.0$
2020P (1,374.6) 2,660.6$
2021P (1,374.6) 3,173.1$
IRR 0.1% 13.5% 17.1% 17.9% 18.2%
1 2 3 4 5
Multiple of Investment 1.0x 1.3x 1.6x 1.9x 2.3x
IRR 0.1% 13.5% 17.1% 17.9% 18.2%
Net Profit ($) 0.8$ 394.8$ 831.4$ 1,286.0$ 1,798.5$
Years Held 1 2 3 4 5
6. High Level of Competition
• Due to high levels of competition, profit margins
remain low
Minimum Wage
• Due to a large number of minimum wage
workers, increased minimum wage is a threat
Volatility of Wing Prices
• Chicken wing prices have increased by 30% in the
last year
Life Cycle Stage & Consumer Demand
• Industry is mature, thus growth opportunities
may be limited
• Chain restaurants must be able to adapt to
changing consumer preferences
Risk Factors
$93.5
$100.2
$105.8 $109.1 $110.8 $112.3 $114.4 $117.2 $119.0 $121.5 $124.3
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Chain Restaurant Industry Revenue ($B)
Chain Restaurant Industry Overview
Limited room for growth, low profit margins, and the vulnerability of individual operators to changes in economic conditions and consumer demand
suggests operators who can control costs and understand consumer preferences are in the best position to be successful
Industry
Characteristics
• Chain and franchised restaurants that
provide food services to patrons who
order and eat while seated and pay
after eating
• Main foods in the industry include
American food, specialty burgers,
seafood, breakfast foods, and Asian
cuisine
• Decrease in same-store sales for full-
service chain restaurants is expected
to continue even though profit
margins for chains have increased
• Fast-casual restaurants on the rise
• Movement toward online
ordering and delivery
• Due to price-based competition
Industry Description
CAGR 3.46%
Consumer Spending
• When spending is high, consumers are more likely
to dine at restaurants
Healthy Eating Index
• Consumers have gradually become more
concerned about their health
• Increases in the healthy eating index correspond
to a decrease in demand for less healthy
restaurants
Consumer Confidence Index
• Consumer confidence impacts discretionary
purchases as restaurant dining
• Consumer demand for low-priced, value items
increases when confidence is low
Source: IBISWorld
Key Economic Drivers
Future
Outlook
CAGR 1.70%
6
7. DineEquity
7.2%
Darden
Restaurants
6.2%
Bloomin'
Brands
3.6%
Brinker
International
3.5%
Buffalo Wild
Wings
1.8%
Other
77.6%
Industry Trends and Competition
A highly competitive landscape is driving the chain restaurant industry towards automation and consolidation
Sources: IBISWorld, Company Filings
50.9%
0.3%
95.6%
91.2%
60.3%
49.1%
99.7%
4.4%
8.8%
39.7%
Buffalo Wild Wings
DineEquity
Darden Restaurants
Bloomin' Brands
Brinker International
Company-Owned FranchisedLife Cycle Stage Mature Regulation Level Medium
Revenue Volatility Low Technology Change Medium
Capital Intensity Low Industry Globalization Medium
Concentration Level Low Competition Level High
Internal Competition External Competition
• Compete with each other on
the basis of price and quality
• Low profit margins drive
stringent cost and quality
controls to maintain efficiency
• Selling the experience of a
meal to potential customers
• Pressured in adverse
economic conditions
• Includes fast food,
independent diners, and other
retailers
• Independent restaurants offer
a more personalized service
Market Segmentation
Peer Store Ownership StructureCompetitive Landscape
• Build strong online presence
and digital strategy
• 20% of consumers use tech to
choose restaurant
Investment
in
Technology
• Automation of the food
preparation process
• Greater use of part-time and
casual employees
Shifting
Labor
Landscape
• Intense competition will drive
consolidation
• Slow US growth encouraging
global expansion
Industry
Restructuring
Industry Trends
• Formerly IHOP, became
DineEquity, Inc. upon
acquisition of Applebee’s
• Business model focused on
franchising brands
• Brand names include Longhorn
Steakhouse and Olive Garden
• Operates over 1,500 company-
owned restaurants in the
United States
• Full-service restaurant group,
including Chili’s and
Maggiano’s Little Italy
• Struggled recently as a result
of increased competition from
fast-casual options
Major Players
7
8. Porter’s Five Forces
Substitutes include fast-food chains,
local sports bar, and prepared food items
• Many restaurant chains pose as strong
substitutes due to cheaper pricing, especially in
tough economic times
• Customers can easily reduce dining budget
• Local sports bars and fast-casual restaurants
serve as primary alternatives
Buyers include take-out or delivery customers
and groups of customers
High
Buying
Power
Large
Number of
Customers
Low
Switching
Costs
Unique
BWW
approach
Product
differentiation
Buffalo Wild Wings offers a distinct sports-
intensive dining experience
Competitors include other dine-in restaurants
such as Hooters & Dave and Buster’s
• There are many options for consumers to
purchase chicken wings from
• Conglomerates with greater advertising power
• Lack of customer loyalty
• With social media & internet usage comes
greater knowledge of alternative restaurants for
customers
• Ease of franchising for larger competitors
• Although barriers to entry are low, it is not easy to enter at the same
level of quality as BWW
• Local, family-owned sports bars can be opened fairly easily
• Each input segment accounts for large fraction of the supplier’s sales
• Low cost of switching to different supplier
• Restaurants are seeking suppliers who offer local and organic options
due to increasing health consciousness among customers
Although the restaurant industry is highly competitive, Buffalo Wild Wings has the opportunity to outperform competitors due to the niche appeal of
its “Wings, Beer, Sports experience”
48%
11%5%
36%
Sports Bar
Buffalo
Wild Wings
Hooters
Dave and
Buster's
Other
Threat of Substitutes: High
BWW: Sports & Wing Experience
Buyer Power: Moderate to High Competitive Rivalry: High
Sports Bar Industry Segmentation
Threat of New Entrants: Moderate Supplier Power: Low
Sources: IBISWorld, Mergent
8
9. Changes in Method of Sports Viewing
0
20
40
60
80
Traditional TV Smart TV Laptop/PC
PercentofUse(%)
Baby Boomer Gen X Millenial
Key Success and Risk Factors
Successful companies must be able to control major cost areas and remain close to key markets, while also managing risk factors, including
consumer demand moving towards a healthier diet and declining viewership of sports, among others
Ability to
Control Major
Cost Areas
Proximity to
Key Markets
Adjustments to
Changing
Regulations
Key Success Factors
100
98 99
95
92
90
87
80
85
90
95
100
105
2011 2012 2013 2014 2015 2016 2017
ESPNSubscriptions(InMillions)
2011-2017:
13% Decline
Required to execute on active development schedule while
managing existing operations
Wages, commodities, rent, and other expenses contribute to
high costs in the industry. Specifically, wages account for the
single highest percentage of costs, ~32.2% of revenue
Consumer demand is trending towards a healthier diet and
lifestyle
The long-term success of brands depends on effective
management in franchise locations; it is a significant part of
the industry
There is a shrinking market of sports enthusiasts; further, the
method of viewing is shifting away from traditional watching on TVs
Growth
High Costs
Health
Franchise
Viewership
Declining Sports Viewership
Key Risk Factors
• Prime locations with optimal understanding of consumer
demands
• Focus on brand development that highlights consumer
experience
• Providing unique experience within chain restaurant industry
• Controlling stock-on-hand and food waste can improve
profits
• As labor costs increase, industry leaders must keep their
labor expenses low
• Ability to keep costs low as new restaurants are opened
• Monitor changes to government policy and regulations to
ensure safety of food
• Sale of alcohol: Highly regulated service/product
• Failure to make changes may result in fines and/or loss of
operating license
Sources: Buffalo Wild Wings Investors Web Page, Company Filings, CapIQ, Earnings Call, Statista, IBIS World, Forbes, WSJ, Nielson
9
11. $122.697 $150.106
$185.839
$234.178
$265.990 $288.840
2011 2012 2013 2014 2015 2016
EBITDA and Margins
EBITDA Margins
Note: 1. Market Cap as of November 13th, 2017, others as of Q3 2017; Sources: Company Filings, Yahoo Finance
15.6% 14.4% 14.7% 15.4% 14.7% 14.5%
Buffalo Wild Wings: Overview
• Description: Buffalo Wild Wings is an owner, operator, and franchisor of fast-
casual bar and grills with a focus on sports entertainment and New York-style
wings
• Headquarters: Minneapolis, Minnesota
• Restaurant Count1: 1,240 (631 company-owned and 609 franchised)
• Full Time Employees1: 4,000
• International Locations: Canada, Mexico, India, the Philippines, Panama, the
United Arab Emirates, Saudi Arabia, and Vietnam
Buffalo Wild Wings is an American casual dining restaurant that caters to sports enthusiasts by offering wings, beer, and other foods. The restaurant
focuses on strengthening the brand, increasing same store sales and profitability and offering “crave-able” menu items
Strengthen the brand domestically and internationally
Continue expanding into new and existing domestic and international
markets
Increase same-store sales, average unit volumes, and profitability
Offer “crave-able” menu items with broad appeal
Focus on operational excellence
Develop and deliver the ultimate guest experience
General Overview Capital Structure and Valuation ($M)1
Key Financials ($M)
Company Strategy
Market Cap 1,840
Debt (Quarterly) 420
Cash 54
Enterprise Value 2,250
EV/EBITDA 8.62x
EV/Revenue 1.11x
P/E 30.10x
$784.478
$1040.530 $1266.719
$1516.223
$1812.722 $1986.793
2011 2012 2013 2014 2015 2016
Revenue
11
12. Management Team
Sally J. Smith
CEO and President
• B.S. in Business Administration and Accounting from University of
North Dakota
• CEO and President since July 1996, CFO from 1994 to 1996
• Holds 50,119 shares
• Oversaw rapid expansion of BWW from 35 locations to more than
1000, led company in its initial public offering in 2003, which raised
more than $50 billion
• Retiring at end of year, being replaced by Arby’s CEO Paul Brown
Alexander H. Ware
Executive Vice President, CFO and Treasurer
• B.A. in Economics from Hampden-Sydney College; MBA from University
of Virginia Darden School of Business
• Executive Vice President, CFO and Treasurer since October 2016
• Holds 5,994 shares
• Former Executive VP of strategic development and Senior Advisor for
Pohlad Companies from 2010 to 2015
• Former Exec. Chairman of MStar Holding Corporation from 2006 - 2011
Emily C. Decker
SVP, General Counsel and Secretary
• B.A. in Chemistry from Duke University; J.D. from the University of
Michigan Law School
• SVP, General Counsel and Secretary since April 2014
• Holds 13,279 shares
• Joined BWW in 2007
• VP, Secretary and General Counsel of BWW since 2011
• Franchise Attorney from 2007 to 2011
With the strong backgrounds of the management team, BWW has great potentials. However, due to the pressure from investors, Smith announced
plans to resign by the end of the year, causing uncertainty within management
Investor Spotlight
• Headquarters: San Francisco, CA
• Founded by Mick McGuire in 2010
• Employee-owned hedge fund that invests in value stocks
• $1.4 bn AUM
• Known for activist approach
• Largest holding is Deckers Outdoor Corp (DECK), an 8.4% stake
• Other notable investments include Netscout Systems (NTCT),
Terex Corp (TEX), CF Corp (CFCO), and Rent-A-Center (RCII)
Marcato Activity
• Largest shareholder
• 9.9% stake in Buffalo Wild Wings
• Looking to push BWLD from 50% franchised to 90% franchised
• BWLD already plans to boost franchised stores to 65% in the
coming years
• Marcato began activism rally in April 2017
• Nominated four candidates for the board, three of which were
elected
• Recently pressured the retirement of CEO Sally Smith and COO
James Schmidt
• McGuire believes share price will triple if his recommendations
are implemented
Sources: Yahoo Finance, Bloomberg, Women’s Foodservice Forum, Company Filings, Morningstar, CNBC, Glassdoor
12
13. Sources: Company Filings, Yahoo Finance, CapIQ, Earnings Call, Mergent Intellect
Margins and Location Expansion
13
Buffalo Wild Wings struggles to maintain operating margins, but generates higher organic revenue growth through increased
investment in company owned locations
Food and non-
alcoholic
beverages
76.2%
Alcoholic
Beverages
19.0%
Royalties and
Franchise Fees
4.8%
Same Store Sales Growth
Revenue Segmentation
Declining Operating Margin
(5.0%)
0.0%
5.0%
10.0%
2011 2012 2013 2014 2015 2016
Franchise Same Restaurants Sales Growth
Owned/Operated Same Restaurants Sales Growth
• Company owned stores have enjoyed more organic growth that franchises as
measured by same store revenue growth
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2011 2012 2013 2014 2015 2016
• Although BWW’s strategy has targeted company owned stores, BWW’s operating
margin has decreased recently
200
300
400
500
600
700
2011 2012 2013 2014 2015 2016
Total Owned/Operated Restaurants Total Franchise Restaurants
• In the last 5 years, 74% of the 423 new locations are owned by BWW
Location Expansion
14. Annotated Stock Chart
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
$70.00
$90.00
$110.00
$130.00
$150.00
$170.00
$190.00
29-Sep-16 29-Oct-16 29-Nov-16 29-Dec-16 29-Jan-17 28-Feb-17 31-Mar-17 30-Apr-17 31-May-17 30-Jun-17 31-Jul-17 31-Aug-17 30-Sep-17 31-Oct-17
Trading Volume BWLD Daily Close Price
Dec 12, 2016
• Recorded 52-week
high at $175.10
• Lowered to Market
Perform by BMO
September 2017
• Posted 52-week low at $95 per share
• $3M impact on sales due to hurricane
• Rated as a HOLD with a price target
between $110 - $155
July 26, 2017
• Announced 2nd quarter EPS of $0.55, net
earnings decreased 57.6% to $8.8M from
$23.7 M year-to-year.
• CEO: “Challenging restaurant
environment; Pressured by historically
high wing costs, mixed promotional day
sales result, higher operating expenses”
October 2016
• EPS increased 23% to $1.23
• Net Earnings increased 17.8%
• Implemented 15-minute
guarantee for FastBreak™
lunch and Half-Price Wing
Tuesdays®
Feb 8, 2017
• Mixed 4th Quarter Earnings Result: EPS
down 34% to $0.87 (expected $1.27)
• Launched “We Do It For You” March
Madness Campaign
Oct 25, 2017
• Stock price jumped
20% to $120 a share
• EPS $1.36, beat
estimates by 72%
• Price Volatility
• Why?
Nov 13, 2017
• Roark Capital made
offer to buy BWLD, the
takeover bid is over
$150 a share ($2.3B)
• BWLD jumped 28%
Nov 27, 2017
• Bloomberg announced
the deal to be worth
$2.7B ($157 a share)
14
Sources: CapIQ, Sec Filings, Yahoo Finance
15. $90.00
$95.00
$100.00
$105.00
$110.00
$115.00
$120.00
$125.00
$130.00
Jul-17 Aug-17 Aug-17 Sep-17 Sep-17 Oct-17 Oct-17
Price Volatility
What Happened?
So What Now What
EPS $1.36
•Beat consensus estimates: $0.79
•5% increase from 3Q16’s $1.29
•Net earnings fell 10.7% to $21.2 million, but thanks to share
repurchases
Revenue
$496.7M
•Increased $2.5 million
•Company-owned sales increased 0.5%, driven by 21 additional
restaurants
•Franchise fees increased 1.0% to $23.7 million
Expenses:
30.8% of
sales
•Compared to 28.9% in 3Q16
•Traditional wings $2.16 per pound $0.44 increase, 25.6% 3Q16
•Cost of labor 31.4% of sales, 70 basis points lower than 3Q16, by
favorable hourly labor
Cost
Savings
Boneless
Wings
Stock up
20%
B-Dub’s focus in 3Q
comes to fruition with a
focus to stabilize
business through cost
savings and efficiency
initiatives in response
to 26% soaring increase
in chicken wing prices
Switched to promoting
boneless wings because
they cost a lot less to
make. Changed Tuesday
promotion from half-
priced traditional wings
to boneless BOGO,
resulting in restaurants’
profitability to grow from
13.8% to 16.6%
Sally Smith: “These
savings helped deliver
above our expectations.
The recent Tuesday
promotion shift at
company-owned
restaurants will continue
to improve cost of sales
while traditional wing
prices remain elevated”
B-Dub adjusts 2017 adj. earnings from $4.85 to $5.15 while expected
same-store sales decline 1.5%
Only 41% locations made the Traditional-Boneless transition,
implying a lot more room for gross margin growth
BWLD remains undervalued: high chicken prices won’t remain
forever, the shift normalizes margins
Back to basics: BWLD executives plan to return to growth by what
made the company profitable to begins with – the dining experience
BWLD share price increased dramatically due to better-than-expected earnings, increased earnings expectations for the fiscal year, and
promotion of boneless chicken wings in light of pricier chicken wings
Sources: Yahoo Finance, Morningstar
Price Spike
15
16. Growth Strategy
Although potentially risky, Buffalo Wild Wings has a number of viable growth opportunities including expanding into both developed and emerging
markets, augmenting franchising strategies, and refining the cost structure with a focus on labor costs
Cost Structure Enhancements
Sources: Company Filings, The Wall Street Journal
Global Expansion
Franchising Activity
Buffalo Wild Wings DineEquity
Number of Stores
Company-Owned
Franchised
1,240
631
609
100%
50.9%
49.1%
3,749
10
3,739
100%
0.03%
99.7%
• Open International Market – few major
foreign competitors exist in the industry
• Emerging Economies – as middle-
income households increase, emerging
markets offer opportunities for fast
paced revenue growth and long term
growth in untapped markets
• Flexible menus – Operating with an
expansive kitchen creates opportunities
for adapting staple items to local tastes,
as well as adding local favorites to the
menu
The ability to franchise restaurants effectively is critical to survival in the increasingly
competitive marketplace. Benefits include:
• Higher contribution margins
• Buffalo Wild Wings: 20.6%
• DineEquity: 59.8%
• Regular royalty payments
• Geographic expansion with reduced financial risk
• Reduced marketing and promotional costs
• Minimum capital investment
4.9%
32.2%
32.0%
2.2%
2.1%
12.8%
13.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Rent &
Utilities
Marketing
Depreciation
Purchases
Wages
Profit
• Currency fluctuations – can alter a
market’s expendable income and the
purchasing power of supplies
• Quality Supply Chain – ensuring the
company’s standards remain in tact
abroad may be difficult and costly
• Foreign Food Cultures – risk of failure
due to a mismatch of company culture
and international cultures
• Political Barricades – corruption, taxes,
architecture, lobbyists, and much more
impede potential disruption
Potential ChallengesGrowth Opportunities
16
18. 2017 LBO Environment
High-Performing Domestic Economy over 3Q17 2017 LBOs
Sources: Baird, CapIQ, Morningstar Direct, EY
PE Acquisition Activity -- Americas
VIX
-31.1%
NASDAQ
+15.1%
10-Year
Treasury
2.32%
• High-rising equity markets in contrast to BWLD stock
performance makes it a great LBO candidate
• 400 % growth in Nasdaq since 2008 crisis
• Signals increased investor confidence and liquidity
• Continuing downward trend toward a pre-crisis level
• Expected raise to 3.0%, signaling substantial growing
confidence in economy
• Higher rates keep the high-rising prices under control
• PE fundraising up 11.7% year-to-year through the
end of August 2017
US$415.8b
• Dry powder up for the year
• LPs turning to ETFs as PE struggles to invest their
dry powder
US$594.5b
• 929 deals YTD with a 15.4% decline in volume
• Consumer goods, tech, health care & utilities active,
representing 56% of acquisition
US$218.6b
5%
5%
16%
13%
12%
16%
9%
24%
PE Deal Value by Sector YTD 2017
Consumer Services
Industrials
Consumer Goods
Health Care
Utilities
Technology
Real Estate
Others
Possible Macroeconomic Conditions
Spending
downturn
• Less disposable income encourages less spending on non-essentials such
as dining at restaurants
• Decrease in job growth rate causes decrease in potential number of
customers willing and able to spend on dining
Economic
recession
• Uncertainty in market causes investors to sell shares, resulting in
downturn in company value
• Inflation may force menu prices up at a faster rate than disposable
income, resulting in decreasing consumption
Interest
Rates
• Increase in interest rates encourages less spending – less sales due to
increased Marginal Propensity to Save
• Decrease has converse effect – more sales due to increased Marginal
Propensity to Consume
Economic
boom
• Increased demand for land – higher fixed costs
• Increased demand for labor – higher variable costs
18
19. BWLD LBO Rationale
Despite a saturated equities market, Buffalo Wild Wings is trading at relatively low levels and offers significant potential for growth
as franchising efforts expand and GTCR operates in a historically low interest rate environment
Sources: Company Filings, CapIQ, Bloomberg
Company Characteristics Industry Position (EV/LTM EBITDA)
Roark Capital Group DealPotential Exit Opportunities
Strengths
Weaknesses
• Stock price has fallen, despite inflated markets
• Ability to franchise improves margins and drives IRR
• Low interest rates make debt cheap
• Relatively low risk, as restaurant performance is
dependent on the economy
• Industry is very mature and proves difficult to
achieve consistent growth
• Growth is heavily dependent on Buffalo Wild Wing’s
ability to adapt to management additions
Public Offering Strategic Sale
• Relisting BWLD on public
markets is the most likely
option due to the scale of the
transaction and a lack of
potential buyers
• In the long term, BWLD has
experienced success in the
public markets
• Publicly traded restaurant
chains are typically owned by a
restaurant group, so we lack
strong comparable offerings
• Sale to an established,
traditional restaurant group is
another option
• Bargaining power of the large
corporate buyer would likely
lower the final sale price
• Feasibility of this exit is highly
dependent on the economy’s
performance in coming years,
as restaurant performance is
directly linked to the economy
6x
7x
8x
9x
10x
11x
12x
13x
14x
15x
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Buffalo Wild Wings Darden Restaurants DineEquity
November 13th: Roark made a $2.3 billion takeover bid
November 27th: Roark agrees to buy Buffalo Wild Wings for $2.4 billion
Deal’s Details
• $157 per share in cash, representing a 34% premium on the stock’s
November 13th closing price
• BWLD will become a closely held subsidiary of Arby’s, led by current CEO
Paul Brown, and will continue to operate as an independent brand
Strategic Rationale
• Adds to Roark’s portfolio of other restaurants, most notably including Arby’s
and Cinnabon – as well as investments in Carl’s Jr., Carvel, & Auntie Anne’s
• Roark sees significant opportunity to improve BWLD’s operations and
expansion given their experience in restaurant turnarounds
19
28. Final Recommendation
Current Standing Outlook
Sources: CapIQ, Yahoo Finance, Company Filings
Recommendation
• Increases in margins due to future normalized
chicken wing prices and labor efficiencies
Improving
Margins
• Focus on franchising more stores in the near
future, both improving margins and reducing risk
Franchising
Focus
• Franchising will grant Buffalo Wild Wings’ an ease
of entry into international markets
International
Expansion
Undervaluation
Comparable
Companies
• Peers are trading at slightly higher EV / EBITDA multiples, providing
an opportunity for multiple expansion post-acquisition
Precedent
Transactions
• Previous financial sponsor restaurant acquisitions have traded
around 9.9x EBITDA, higher than Buffalo Wild Wings’ 9.0x valuation
DCF
Analysis
• Exit multiple DCF results in a share price of $161.43, clearly at a
premium to the pre-announcement share price of $117.25
Historical
Share Price
• Trading at prices as high as $175 in Dec. 2016, the current share
price has potential for price appreciation in the equity markets
• Buffalo Wild Wings has consistently attained revenue and
EBITDA growth since conception
• Revenue CAGR from 2012–2016: 17.6%
• EBITDA CAGR from 2012–2016: 17.8%
• Though EBITDA margins have slowly declined since 2012,
they jumped 2.6% in the company’s most recent earnings
call, providing an optimistic outlook for future improvement
• Currently franchises 609 stores (49.1%), a relatively small
proportion relative to its peers
• With CEO Sally Smith resigning, there is an opportunity to
potentially change Buffalo Wild Wing’s growth strategies
With a projected IRR of 18.2%, we recommend GTCR pursue acquiring BWW
28
