Montclair Capital

Case Prompt

Your client, Montclair Capital (MC), is a private equity firm that invests in mid-sized companies across Europe. MC is currently evaluating the acquisition of a dairy farm located in the Normandy region of France. Due to consolidation in the European dairy industry, MC believes this acquisition may present an attractive investment opportunity and has retained our firm to determine whether it should proceed with the acquisition.

Background information if the interviewee asks:

• Objective: MC wants to determine if acquiring the dairy farm would be profitable and whether entering the agricultural sector makes sense given the trends in the dairy market.
• Current Market: Currently, the French dairy farming market is valued at approximately €12B annually. The Normandy region represents approximately €1.5B of this market, with several independent farms and cooperatives competing.
• Business Model: The target dairy farm produces raw milk which it sells directly to regional dairy processors that manufacture products such as cheese, yogurt, and butter. The farm focuses solely on milk production and does not produce additional dairy products.
• Trends: Demand for dairy products in Europe has remained stable, while consolidation among dairy farms has increased. Larger agricultural groups are acquiring smaller farms to increase production scale and improve operational efficiency.
• Possible Market: There are three other large dairy farms in the Normandy region that produce comparable milk volumes and supply similar dairy processors.
• Costs: MC estimates that acquiring the dairy farm and investing in operational improvements would cost approximately €120M, but once acquired, the farm’s operating costs are expected to remain stable.

General response summary

• This case is meant to be driven by the interviewee; allow him/her to drive the case after each prompt and respond with “ands” if depth of explanation does not make path forward clear.
• Most candidates will recognize that this is a profitability case. A good candidate will see aspects of market entry and tailor their problem solving accordingly. Additionally, he or she will focus not only on current business model but additional value add activities.
• Interviewee should develop a MECE framework. Some example buckets are:
  • External: market factors, customer demand, regulatory concerns
  • Revenue: pricing strategy, volume, service offerings
  • Costs: identify variable and fixed costs, benchmark competitors
  • Market: competition, market share, barriers to entry
  • Entry: acquisition, JV, build from ground up
• Drive the interviewee to think outside of the box in terms of product offerings. The target farm currently only produces raw milk, but there could be opportunities in producing value-added dairy products (e.g., cheese, yogurt, organic milk), improving supply agreements with processors, or expanding distribution channels.