Pallas Pharma: Is This Target Growing, or Just Floating?
Consulting
hard50 min0 submissionsFlipkart
Scenario
A private equity client is considering acquiring a specialty pharma business in US at 15x EBITDA.
The target turns over $391 M, growing at 43% a year, at a 30% EBITDA margin. The underlying market is growing at about 9%.
Its largest customer is 42% of revenue; the top five are 72%. The average remaining contract term is 3 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
- 1759.5
- ev ebitda multiple
- 15
market
- market growth pct
- 9
target
- ebitda m
- 117.3
- revenue m
- 391
- ebitda margin pct
- 30
- revenue growth pct
- 43
concentration
- top 5 customers pct
- 72
- largest customer pct
- 42
- average remaining contract years
- 3
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: Amber Grid: 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.