Solstice Travel: Is This Target Growing, or Just Floating?
Consulting
medium50 min0 submissionsMcKinsey
Scenario
A private equity client is considering acquiring a online travel business in Southeast Asia at 17x EBITDA.
The target turns over $357 M, growing at 28% a year, at a 27% EBITDA margin. The underlying market is growing at about 4%.
Its largest customer is 44% of revenue; the top five are 69%. The average remaining contract term is 2 years.
The vendor's model assumes growth continues at the current rate for five years. Your client has four weeks and wants to know whether to proceed.
Supporting data
deal
- implied ev m
- 1638.6
- ev ebitda multiple
- 17
market
- market growth pct
- 4
target
- ebitda m
- 96.4
- revenue m
- 357
- ebitda margin pct
- 27
- revenue growth pct
- 28
concentration
- top 5 customers pct
- 69
- largest customer pct
- 44
- average remaining contract years
- 2
Your task
Advise the deal team. Your answer should provide:
- Analysis — decompose the growth. How much is market, how much is share gain, and what does the multiple assume?
- Risks — what could make this a bad deal at any price.
- Recommendation — proceed, reprice, or walk, and the one diligence question you would answer first.
State any assumptions you make.
Ready to move forward? Up next: Bluepeak Logistics: Is This Target Growing, or Just Floating?Next question
How you'll be graded
80 points, 60% to pass.
- recommendation15
- market analysis25
- risk assessment20
- financial analysis20
Hint
Reveal suggested structure
Growth = market growth + share change. Test whether share gain is repeatable, then stress the multiple against concentration and contract cover.