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Copyright Summa Capital

Case Musti & Mirri Group


In September 2014 a Finnish private equity firm Vaaka Partners (Vaaka or The Seller) was
contemplating on a sale of one of its portfolio companies Musti & Mirri Group (MMG or The
Company). The Company had performed well and experienced strong growth since Vaaka
acquired it in 2010. Vaaka knew that the company would arouse great interest within the Nordic
private equity operators and decided to go forward with a structured auction process.

During the fall, Summa Capital (Summa) met with a few leading Nordic private equity firms to
discuss about the MMG sales process. EQT Mid Market (EQT) was impressed by Summas
knowledge of the Company and industry as well as insights regarding the process and Summa was
convinced of EQTs vision for MMGs future and means to complete the transaction. EQT
engaged Summa as their buy-side advisor in the MMG sales process.

EQT saw the growth potential in the Company both through organic and non-organic channels and
was very well educated on the current situation of MMG. However, EQT and Summa knew that
the competition for the ownership of the Company would be intense and that they needed to find
a competitive edge. During the process, EQT approached the representatives of Zoo Support
Scandinavia AB, the largest pet specialty retailer in Sweden. The owners of Zoo Support indicated
that they were willing to sell their company to EQT / MMG with the right terms. The acquisition
of Zoo Support would double MMGs revenue and the add-on opportunity seemed quite lucrative.
Could this be EQTs competitive edge over the other bidders in the process?

In December 2014, the first indicative bids have been submitted and the deadline for the final bids
is looming. Summas team is feeling good about the mandate and confident about EQTs
possibilities in the race. Summas team is preparing the business case and valuation view to be
presented to the investment committee of EQT, where the decision on whether to submit a final
bid on MMG and the level of the bid is made. Summa needs to provide the committee sufficient
analysis on the business case and the add-on opportunity to convince them on the potential of the

Aalto University School of Economics 1

28E33000 Mergers and Acquisitions
Copyright Summa Capital

Case Musti & Mirri Group

Task overview

As a financial advisor, your task is to advise EQT Mid Market (EQT), a Nordic private equity
firm interested in acquiring Musti & Mirri Group (MMG or The Company). In order to excel
in your role, you have to pay significant attention and execute the following tasks:

1) Prepare a presentation to your clients investment committee. The presentation should give
the committee a solid information package based on which further actions could be taken. You
could think of including the following aspects to your presentation material:
a. A brief overview of MMG and analysis of the current situation
b. Description of the transaction rationale
c. Valuation of MMG
d. Discussion on the structure and financing of the transaction
e. Analysis of the add-on opportunity in Sweden: should EQT acquire Zoo Support and
would the acquisition have an effect on the purchase price of MMG? What could be
the sources for synergies?
f. Overall view on whether EQT should pursue the transaction and your suggestion on
the level of the final purchase price and proposed next steps

In addition, it is integral to provide your client with a solid reasoning for the potential
acquisition of MMG. In addition, you should provide an initial list of potential due diligence
questions your team views integral as part of executing the transaction.

2) For the basis of your presentation prepare at least a basic leveraged buyout model (LBO) and
multiples analyses for MMG valuation. Regarding the LBO, build up a simplified 5-year
financial model (2015-2019). Your financial model should at least include income statement
and key balance sheet items to calculate cash flows. For simplicity, keep your model at a
relatively high level. Use comments to make the model more understandable.

It is recommended that you incorporate at least 3 historical financial years (2012-2014) in your
model, in order to ensure sufficient understanding of net sales and profitability development,
as well as capital expenditure and working capital requirements. However, in this assignment,
the historical years are for reference only.

Aalto University School of Economics 2

28E33000 Mergers and Acquisitions
Copyright Summa Capital

Case Musti & Mirri Group

In general, you should use information primarily from management presentation notes and other
material given with this assignment. The actual and estimated financials of MMG are prepared
solely for the purpose of this assignment and should be used as the sole source of financial
information. In addition, you may use publicly available material to complement information given
about the company and the market. If you consider lacking some integral information, make
assumptions and explain your reasoning behind the assumptions.

Presenting the results

Your end product should be a maximum 20-page PowerPoint presentation. In addition, you should
hand-in an excel file containing the calculations behind your analyses, presented in an easily
understandable format. It is important that the main results from the excel model are integrated to
the presentation.

Aalto University School of Economics 3

28E33000 Mergers and Acquisitions
Copyright Summa Capital

Case Musti & Mirri Group

Notes from the MMG management presentation to EQT:

The pet product market is growing faster than the broader retail market in Finland and
Sweden. Growth is driven by increase in the pet population in addition to increase in spend
per pet. The trend of pet humanization is leading to customers switching to more premium
products and to specialist stores, which are taking market share from the grocers.
o Approximately 30% of the Finnish and Swedish households own a pet
o Market size in Finland is ~ 365m and is estimated to grow to ~ 440m by 2017E
o Market size in Sweden is ~ 590m and is estimated to grow to ~ 660m by 2017E

MMG has experienced strong growth and increase in profitability under the ownership of
Vaaka Partners
o Growing share of own brands
o Establishment of logistics centre in Kaarina, Finland in 2011
o Successful roll-out strategy in Finland combined with the acquisition of Grizzly Zoo
in Sweden in 2012
o Superior customer value proposition with engaged and qualified personnel in addition
to best Omni-channel platform
o Strong management team with proven track record of organic growth programmes
and acquisitions

MMG sees its growth opportunities in Finland and Sweden in the mid- to long-term
o Main focus in organic growth
o Development of MMGs offering and services also considered as a major opportunity
o Strong platform for future development through well invested infrastructure
o In 2014, MMG acquired 11 of their franchise stores in Finland. MMG continues to
receive a franchise income of 17% of the sales of the remaining 23 franchise stores
o The management estimates growth of ~ 15 20% pa in the coming years
o Profitability is estimated to increase due to economies of scale and increased sales of
own brands
o The management expects decrease in capex requirements due to the past investments
and already existing infrastructure

EQT is aware that there are on-going discussions with few other buyer candidates, both
industrial and financial and that the bid from EQT will most likely be competing with other
offers for MMG
Aalto University School of Economics 4
28E33000 Mergers and Acquisitions