Sports Nutrition Acquisition

Case Prompt

A Canadian sports nutrition company specializing in protein bars, NutriBar Co., is planning to acquire another company specializing in energy gels, GelFuel Co. NutriBar Co. is currently the market leader in protein bars in Canada, but the overall segment is growing slowly compared to the market and they want to diversify. They have hired you to tell them whether this is a good idea.

Case background:

• Only the energy gel market is in scope; all other energy supplements (e.g., for general fitness) are excluded.
• The slowing protein bar growth does not affect the energy gel industry, as energy gels are considered higher in performance nutrition.
  

General response summary

Sample of Strong Framework: Acquire or not?

Market size

• How large is the market for energy gels?
• How much is this industry expected to grow? Is it trending up, down, or stagnant?
• How large is the threat of new entrants?

Profitability

• How profitable will this product be (e.g., pricing, costs)?
• Is the energy gel market more premium than protein bars, in terms of price?

Synergies / dis-synergies

• Can we leverage NutriBar Co.'s existing capabilities (distribution, mktg, sales)?
• Will entering energy gels cannibalize existing sales?
• Is the overlap between energy gel and protein bar customers high?

Competition

• Is GelFuel Co. the preferred brand in the market?
• Who are the current competitors?
• What are the barriers to entry?

Deal Price

• What is the deal price?
• How will we finance the deal?