Roche Acquisition Essay

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Why Chapter 11? Question 1: Why did Marvel file for Chapter 11? Were the problems caused by bad luck, bad strategy, or bad execution? Marvel sales breakdown (FY1995) Sports and Entertainment Cards Bad Strategy • • After 1993: Decline of Sales (Trading Cards, Stickers and Comic Books) Unpromising business lines represent 61% revenues  other forms of child entertainment are more attractive (mainly video games)  disappointed collectors because comic books as investments are not attractive anymore High Leverage Bad Paid 25% Premium for SkyBox Execution Investments in declining markets EBITDA Margin steadily decreasing Bad Luck 21.70% 6.40% 10.90% 17.80% 22.40% Children's Activity Stickers Publising 20.70% Confectionery Consumer Products and Licensing Toys 1000 800 600 400 200 0 1992 1993 1994 1995 Sep 96 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Total Equity Total Debt Debt Ratio EBITDA Margin • • • • Chapter 11 • • • • Comic book business and publishing segments led to losses of $48,5m in 1995 Continuation of further leverage by buying sky during a declining entertainment cards market turned out to be a bad move Missed out opportunity to tap growth market  Bad strategy supported by bad execution Applying for Chapter 11 was still more reasonable then e.g. Chapter 7 and bad luck ultimately led to Chapter 11 Source: HBS case study 2 Evaluation of the Restructuring Plan Question 2a: Evaluate the proposed restructuring plan. Will it solve the problems that caused Marvel to file Chapter 11? Pro • • • Improves liquidity profile Reduces debt burden Financial ability to acquire Toy Biz Toy Biz would provide significant cash flows to service debt Banks, suppliers, employees paid in full, therefore allowing smooth business continuation • • • • • • Con Increased influence of Ron Perelman Liquidity only due to large

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