Musimundo Case Summary

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Musimundo Case Summary Pegasus Capital is a company founded by Mario Quintana, Michael Chu, and Dirk Donavan, whose objective was to purchase Latin American businesses, with promising growth potential. In July 2003, they had acquired Musimundo, a company first launched by Elias Garber, thirty years after opening the first music store in Buenos Aires. Due to the phenomenon otherwise known as the Tequila crisis in 1994, Garber decided to pull out from the entertainment retail business and into expansion of product lines. This was relatively short lived for Garber, as Musimundo filed for bankruptcy in 2001 since it could no longer leverage its financial capital for expansion. Quintana’s company ran the risk of some unprofitable business acquisitions, seeing as the legal systems in Latin America faced various uncertainties and it was difficult to make up for the lost capital from the unstable economic demands. For Pegasus to strive in the market, they would have to identify suitable projects and guarantee their investors a significant financial return. The Argentinian market was plagued with foreign debt and high domestic interest rates, which led to the overvaluation of the Argentinian Peso. These unpromising conditions made it simple for the Pegasus partners to capture a share of the market and take on a controlling position. In June 2003, Nalda, the CEO of the corporate chain, transformed Musimundo into the ultimate “one stop shop” for electronics. With their knowledge of the local demand, they diversified their product lines, and were able to sell just as much hardware and electronics as CDs and cassettes, all within the first half of 2004. The company had six product lines: books, accessories, computers, electronics, videos, and music. They held between 8 000 and 10 000 musical titles, which made them strive among their competition. Stores

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