Sierra Capital Partners Case Study Solution
Introduction
Looking over the case it presents the journey of Tessa Marks and Jason Church, who started Sierra Capital Partners (SCP). SCP is a search fund to purchase and run a company together. After 20 months of searching, they found themselves evaluating three promising acquisition opportunities: Pocket Book Toys (PB), Great Greens (GG), and American Veterinary Company (AVC).
Problem Statement
Sierra Capital Partners (SCP), have only five months of runway left in their search fund to purchase and run a company. They need to make a decision on which opportunity to pursue and whether to put all their energy and focus into one opportunity or run parallel processes. They also need to decide if they should attempt to raise additional search capital to take off some of the pressure, which would be expensive and distracting.
Situational Analysis
SWOT Analysis
Strengths of SCP include the complementary skill sets of its founders, their strong work ethic, and shared professional values. SCP also has weaknesses in terms of after 20 months of searching, the fund has only five months of runway left, which puts pressure on Marks and Church to make a decision quickly.
Opportunities for SCP include the potential growth and profitability of the companies they are evaluating. The threats to SCP's success include potential competition from other search funds or companies seeking to acquire the same target companies.
PESTLE Analysis
In terms of political factors, SCP is likely to be influenced by the government policies and regulations in the countries where they operate. Economic factors such as inflation, interest rates, and economic growth can affect the company's investment and financing decisions. The sociocultural environment could affect the demand for SCP's investments, as consumer preferences and cultural values evolve.
The rapid pace of technological change also poses challenges for SCP as they seek to evaluate potential acquisitions and stay current with industry trends. Legal factors such as labor laws, intellectual property regulations, and environmental laws could impact the company's operations. Finally, SCP must also consider environmental factors, including the impact of climate change, energy policies, and natural resource scarcity on the industries in which they invest.
Alternatives and It’s Evaluation
Pocket Book Toys (PB)
It is a direct sales company that offers high-quality educational toys for babies, toddlers, and young children. The company has a solid customer base and offers unique and innovative products. PB's products are aligned with the trend of parents investing more in their children's education and development. The company's focus on quality and innovation aligns with the increasing consumer preference for eco-friendly and educational products. The direct sales model of the company allows for a more personalized customer experience, which is highly valued in today's market.
Great Greens (GG)
Great Greens (GG) is an eco-friendly start-up that manufactures and distributes "green" fertilizers for home gardeners. GG's offering is unique, catering to environmentally conscious consumers who prioritize sustainable gardening practices. The company has established a loyal customer base, and its products have been well-received by the market. GG's focus on sustainability is also aligned with the growing trend towards eco-friendly products and practices, which presents a significant growth opportunity for the company.
American Veterinary Company (AVC)
The company is a chain of 15 small veterinary hospitals in Los Angeles, California. The company has a well-established brand and a strong reputation in the local community. The veterinary services industry is a growing market, and the demand for high-quality pet care is increasing. The acquisition of AVC could provide an opportunity for Sierra Capital Partners (SCP) to capitalize on this trend.
One of the key strengths of AVC is its experienced and dedicated staff. The veterinarians and support staff at AVC have a passion for animal care and are committed to providing the best possible service to their clients. This has helped to establish the company's strong reputation in the community.
Recommendation and Conclusion
Based on the analysis of the three alternatives, it is recommended that Tessa Marks and Jason Church pursue the acquisition of American Veterinary Company (AVC). Furthermore, the veterinary industry is expected to grow in the coming years as pet ownership continues to increase and owners become more willing to invest in their pets' health. In addition to these factors, the financial analysis given in the case for the three alternatives revealed that AVC has the highest potential for return on investment, with a projected IRR of 20% by acquiring additional facilities.
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