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Acquire product lines to complement the core in growing sectors

Here the plan of action proposed is to acquire small players that offer healthier and more convenient
soups that are slowly gaining popularity. Acquisitions of this nature will further broaden the Brannigan
product portfolio into newer markets, hereby increasing the market share of the company.

Pros:

Entering into known markets is relatively easier, additional investments are negligible.
Entry in to the flavours that growing in the market will be favourable in the given market
conditions.
Option to merge the acquired brands into Brannigan brand umbrella, and thus reduce
cannibalisation effects.
Easy availability of debt at low rates will ease the acquisition and not impact the profit.

Cons:

Substantial initial investment into acquisitions needed.


Experience from prior acquisition Annabelle make new acquisitions less attractive since Annabelle
did not breakeven in the projected time-frame.
Merging the acquired brands into the Brannigan brand umbrella will effectively reduce shelf space
for Brannigan products.
Maintaining the acquired brand will increase marketing costs.

Year 2011 2012 2013 2014 2015 2016


Net Sales of Brannigan Foods $7,330.00 $7,979.00 $8,230.00
Net Sales in US soup division $3,034.00 $2,973.00 $2,913.00 $2,854.74 $2,797.65 $2,741.69
Less:
Cost of Goods Sold $1,668.70 $1,635.15 $1,602.15 $1,570.11 $1,538.70 $1,507.93
Marketing, R&D & Selling Expense $424.76 $416.22 $407.82 $399.66 $391.67 $383.84
Miscellaneous Expenses $624.93 $627.00 $600.01 $588.01 $576.24 $564.72
Net Earnings $315.61 $294.63 $303.02 $296.96 $291.03 $285.20
Marketing and sales expense
Advertising & Promotion $189.37 $176.78 $181.81 $178.18 $174.62 $171.12

Red Dragon Foods


Year 2011 2012 2013 2014 2015 2016
Sales $ 36.00 $ 38.16 $ 40.45 $ 42.88 $ 45.45 $ 48.18
Cost of Goods Sold $ 19.80 $ 20.99 $ 22.25 $ 23.58 $ 25.00 $ 26.50
Advertising & Promotion $ 4.86 $ 5.15 $ 5.46 $ 5.79 $ 6.14 $ 6.50
Cannibalization $ 4.92 $ 4.82 $ 4.72 $ 4.63 $ 4.53 $ 4.44
Net Earnings $ 6.42 $ 7.20 $ 8.02 $ 8.88 $ 9.78 $ 10.73

EBITDA $ 4.20
Acquisition Price (x6.5) $ 27.30
ROI 29%

Roarin' Cajun Foods


Year 2011 2012 2013 2014 2015 2016
Sales $ 18.00 $ 19.08 $ 20.22 $ 21.44 $ 22.72 $ 24.09
Cost of Goods Sold $ 9.90 $ 10.49 $ 11.12 $ 11.79 $ 12.50 $ 13.25
Advertising & Promotion $ 2.43 $ 2.58 $ 2.73 $ 2.89 $ 3.07 $ 3.25
Cannibalization $ 4.92 $ 4.82 $ 4.72 $ 4.63 $ 4.53 $ 4.44
Net Earnings $ 0.75 $ 1.19 $ 1.65 $ 2.13 $ 2.62 $ 3.14

EBITDA $ 2.80
Acquisition Price (x6.5) $ 18.20
ROI -13%

Brothers Gourmet
Year 2011 2012 2013 2014 2015 2016
Sales $ 12.00 $ 12.72 $ 13.48 $ 14.29 $ 15.15 $ 16.06
Cost of Goods Sold $ 6.60 $ 7.00 $ 7.42 $ 7.86 $ 8.33 $ 8.83
Advertising & Promotion $ 1.62 $ 1.72 $ 1.82 $ 1.93 $ 2.05 $ 2.17
Cannibalization $ 4.92 $ 4.82 $ 4.72 $ 4.63 $ 4.53 $ 4.44
Net Earnings $ -1.14 $ -0.81 $ -0.47 $ -0.12 $ 0.24 $ 0.62

EBITDA $ 3.40
Acquisition Price (x6.5) $ 22.10
ROI -52%

Assumptions:

Advertising and promotion budget is assumed to be 60% of net earnings.


Miscellaneous expenses are assumed to be 38% of COGS.
Marketing, R&D & Selling Expense is 15% of net sales of US soup division.
In analysing the potential companies for acquisition, it was assumed that COGS is 55% of sales,
advertising expense is 13% of sales, and cannibalisation was 0.15% of net sales of Brannigan US
soup division for all companies.