Contents

• Executive summary
• Would you invest in Babycare?
• Screening
• Evaluation or due diligence
• Deal structuring
• How is or isn’t Babycare’s business model tailored to the idiosyncrasies of an emerging market?
• How would you evaluate Babycare’s funding opportunities?
• Financial analysis of Babycare
• Comparative analysis on business model of Babycare with other consumer product companies in the industry
• Some problems that Babycare may face in future over its Business model
• Bibliography

Description

Chris Mumford, Chief Financial Officer of Babycare Ltd and Chief Executive Officer Matthew Estes , the two executives were seeking $2-$3 million of expansion capital to fund the first major wave of new center openings in large cities throughout China. Babycare Ltd has got a novel business model but it is still in its early years of operations. The company is running on sound business model which tailor made with the emerging markets of China. But to expand the operations of business & to have more retail outlets at various centers, the top two executive are trying to convince many private equity firms & venture capitalist firms to fund their company. They have got very impressive financial statements with increasing sales & profit margins year after year. They have been offered certain investments from various angel investors & other investment companies but the valuation with the desired funds to be raised are not appropriate. Currently they are dealing with Franklin Templeton Investments, a potential third-round investor. The partner spearheading the Templeton team was Choong-Huei Seow. Who is yet to be convinced over the low working capital requirement, zero cash receivables & top-line revenue estimates derived from average sales per salesperson and growth in salespeople rather than customer additions and purchase rates business model of the company introduced by Estes & mudford. Baby care Ltd is following a hybrid of direct marketing & multi level marketing strategy with internal distribution system. They have implemented advanced technology using oracle’s ERP in the business model to enhance the control on distribution system.
Babycare is playing high on emotional front. They have their team of customer representatives of mothers who are the best sales force for a product like Babycare which would also help in face to face interaction with the customer, building stronger & long term relationship with the customer. Babycare Ltd has got healthy financial statements with sales, net income, gross income increasing year after year. They have diversified into many new markets. Currently they are facing fund raising problems because the company’s top management is looking for expansion with a perception of very high prospects for their product in the emerging market like China. But in this competitive world they are feeling the heat of it & having a tough time in negotiating with the deals with numerous venture capitalist companies, private equity firms. They do not want to dilute the hold of the management & they too think that it would too early for Babycare Ltd to jump into becoming a public Ltd by coming up with an initial public offer (IPO).
So for now they have been in negotiation with an investment company Franklin Templeton & hoping to raise funds around $2-$3 million with appropriate valuations of the company.