Business GCSE case study.Watch
Amplify will roll out the Tyrrells brand in America and Tyrrells will do the same with Amplify's SkinnyPop brand in the UK. Tyrrells includes the Australian firm Yarra Valley Snack Foods, which it acquired in 2015 and the German-based company Aroma Snacks, which it acquired in 2016.
Tyrells was founded in 2002 by potato farmer William Chase. He decided to move into making crisps where he felt he could make more profits than selling potatoes to the big supermarkets. Mr Chase sold the company in 2008 for nearly £40 million. HE used some of the money he raised from the sale to set up a distillery producing premium vodka and gin.
1. What is meant by a 'private limited company'? [2 marks]
2. Explain how Amplify would take over Tyrrells. [4 marks]
3. Analyse the factors that might determine the value of Tyrrells when it was sold. [6 marks]
4. Amplify bought Tyrells as a means of expanding. Evaluate whether a takeover is a better way of expanding than organic growth [12 marks]
Could I please have some help with these questions.
Thanks for any help given.
- This is a textbook definition. You can just look it up - yes, sometimes you do need to memorise definitions and parrot ideas.
- There is a myriad of ways, but the topic essentially focuses on corporate finance; examples: leveraged buyouts, cash sale, stock swaps, loans/debt issues, equity purchase. There are also creative ways of financing a deal.
- How long is a piece of string? Factors could involve financial ratios - a whole list of them, including current debt levels, going concern (whether the business will survive), profitability, asset values, liabilities, taxation, comparables, valuation ratios. Non financial factors include, SWOT analysis, marketability, market share, scalability, technological advances, situation in the UK's markets, operational difficulties, competition, USP, patents, brand value, customer loyalty, customer data, key personnel, IPs
- That's really difficult to say. Have you see the M&As in the 90s? It was a like a craze back then.
Those who have never expanded a business has no right to say organic growth is more profitable, or in anyway better. Organic growth is hard.
Then again, it will depend on whether brand loyalty is a thing when you acquire a business. Questions you will ask: is it worth it? What is the NPV of the transaction? What will you do if it doesn't pan out? What risks will the parent company bear? What is the brand's value before the acquisition, and if it's bad, is there a way to save it? Should you rebrand? No idea of how to run the business without the experience? However, in practice, I have only seen organic growth being a very weak argument for not buying other businesses.
Existing client base, assets in place, proven track record, existing personnel, IP, brand developed over X years, existing technology and systems established in the business, existing suppliers, etc. (reduced risks). People can argue acquisitions tend to come with a premium; thing is, if it's such a high premium, why are you trying to buy it in the first place? You buy businesses at discount to their book values - cheap and underpriced; if you don't buy it underpriced, then how are you expected to make any gains from it? Buffetology 101/Fundamental investing.