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IMC 3, Section 08
October 1st, 2003
PepsiCo Acquisition Case
PepsiCo is a company that through the years has been able to grow and expand as a company in two ways. ... In such manner now PepsiCo has to decide if the possible acquisition of two companies, Carts of Colorado (CoC) and/or California Pizza Kitchen (CPK), is strategically and financially a sound step for them to take.
After analyzing both of these companies in terms of their strategic components and their financial standing, we have come to the decision that it would be in PepsiCo’s best interest to acquire both companies. Strategically CoC and CPK can provide much value for PepsiCo’s future growth. CoC offers PepsiCo a unique opportunity to integrate vertically backwards in their value chain and to receive a manufacturer of ‘outlets’ for their existing businesses. ... Similarly to CoC, CPK also has an interesting value proposition that PepsiCo should capitalize on. CPK is a restaurant radically different to those that PepsiCo already owns. ...
Lastly, PepsiCo can afford to buy these two relatively small players. ...
Carts of Colorado
The purchase of this company to PepsiCo would be the acquisition of a unique tool. ... Strategically PepsiCo can take advantage of CoC’s opportunities and it’s currents strengths in quality, thus, being able to grow in the cart storefront business having flexible locations and permitting fast expansion.
CoC also has quite a bit to offer PepsiCo in terms of their achieving their overall company goal of massive and continual growth. ... Although this is something entirely new for PepsiCo and doesn’t seem like a “perfect fit,” this could be a great opportunity to grow into the manufacturing business and establish an additional source of revenues.
CoC’s two founders share a focused vision that PepsiCo would be foolish to replace. Much like their current companies under the corporate umbrella, PepsiCo should leave CoC to operate autonomously with their only intervention being the PepsiCo standard: looking after any top management and strategy changes, and capital expenditures. PepsiCo could maintain communication by bringing in people from Taco Bell, KFC, and Pizza Hut to design carts that would be specifically tailored to each restaurant. ... We next found the terminal value using the fifth year FCF as the basis multiplying it by (1+ perpetual growth), which for COC we deemed at 4% and then dividing by PepsiCo’s WACC minus perpetual growth.
Approximate Word count = 1890
Approximate Pages = 7.6
(250 words per page double spaced)
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