The valuation and financing of LADY M confections

Lady M, run by Roamniszyn, has been successfully marking its presence in the market since its
establishment carefully catering to the authentic, less sweet desserts. It had created a unique image
that was difficult to copy and hence was a great success in whichever city it entered. The success
story of the firm was such that within a few years of time it expanded in New York City, Los Angeles
and had been licensed in both Singapore and South Korea. The success of the establishment is
evident from the stark rise in the sales revenue of 82.3% in the previous year. In such crucial years of
success and growth the owner of the bakery has two options: either to expand the business by
opening up at the world trade center or expanding by accepting the investment offer made by the
Chinese investor of 10 million dollars for an equal equity stake in the company. Both the options have
their pros and cons. Investment in China opens up a new opportunity market in Asia where they have
been constantly offered opportunities of investment and lies the opportunity of growth in foreign
markets. The problem with the acceptance of investment is that this may lead to sale of 13% stake in
the company to a foreign investor and hence losing control in a business which is very niche and does
not require large number of people controlling it.

If the company goes for an establishment in the World trade centre, there lies a huge market for
sales to family and also to people working there who demand for easily available cake slices. This sis
due to the commercial nature of the property. There lies huge scope for high revenues and
expansion adding to the growth of the company. The hurdle that lies in the way of establishing at the
world trade centre is that the costs pf establishment and construction and the rent is very high. For
this Romaniszyn and Tom calculated the break-even analysis by calculation how much sales will help
them make a profit in the first year. High utility costs are just an add on to the high costs. On the
basis of the choice that incurs lesser costs, Romaniszyn and Tom are required to a decision regarding
the strategy that maximises returns for the company and helps it stay on the growth track which is
now.

Kriti Ahuja

B19144

BM C