The case defines the importance for the acquisition of a particular bakery in Canada. David Kuchen was the youngest entrepreneur, who wanted to purchase Cake Masters in order to become theentity’s owner as well as he was willing to provide an attractive package of profits to the selected shareholders, who were likely to invest in such a project implemented by Kuchen.

In the beginning, Kuchen was quite anxious about theparticular takeover of the bakery ashe knew that the potential damage can occur through the operations of a new entity and also would be subject to low profits distributed to the new shareholders. He was trying to discuss the projected results over the five years and analyse the ratio of profit occurred through the proper use of operations with Cake Masters.

The asking rate was already given to Kuchen ($5 million), which showed that the bakery could be sold with the particular price with no debt involved. However, he wanted to evaluate the internal operations of Cake Masters and also analysed the proper valuation that could be suitable to such asking price.

After the detailed consideration, he discovered the potential capital to be involved in order to run the operations of Cake Masters. First of all, heanalysed that a particular amount of capital would be needed to invest in the frozen baked machines.Secondly,he was aware of the additional amount to properly run the operations, and for that he was seeking to collect the loan from the bank for expansion.

The total amount to debt could be only $2 million to expand the process of the acquired business, therefore Kuchen contacted with the selected bank and the deal was finalized for 8% interest of the principle amount.

Now the problem was to look after the accurate results in the future, which would benefit both the investors as well as the owner of the business. He knew that the exact amount should be paid for the bakery in order to be successful according to the proposed results.Lastly, he was trying to value the particular business in order to bid for Cake Masters and to attract the potential investors for the future operating results.

External Evaluation

The business in the field of bakery was quite successful in Canada as well as the U.S because people were likely to consume different tastes in the field of cake as well as the hospitality foods. The current situation in greater Toronto area was enormous because of the huge awareness in the food industry established in the particular area. However, some external factors can be included in order to judge the impact for the food chains in the current economic situation of the country.

Business Cycle

The industry of bakery had grown its sales volume over the past couple of years because of the innovative consumer products introduced by the market competitors. However, according to the external structure of the business, Cake Master was quite similar as compared to the other businesses in the industry. The business cycle was considered to be favourable for the GDP of the economy because the current results of the food industry has driven towards the peak, which showed enormous results for the growth of the economy.

Therefore, the acquisition of Cake Masters could benefit Kuchen in terms of market capitalization and also had the advantage of established economy. He also knows that the economic results showed less barriers to entry and therefore, it would improve the GDP during the development phase of greater Toronto development market.......

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