Children’s Cooking Schools - China
Services Provided: M&A Advisory
The Assignment
A leading German bakery ingredients group was looking to make a minority investment in a China based children’s education enrichment chain that focused on teaching cooking skills. We were asked to assess the investment and determine the attractiveness of the deal as well as the associated risk. This group had looked at multiple market entry strategies in the past and had failed once previously in that market.
Our Approach
Our China team assessed the investment in four ways – interviews with the Chinese HQ management team, review of historical and recent financial statements, quantitative consumer research in Shanghai & Beijing as well as review of secondary data, and visits to a sample of stores in Shanghai, Beijing and Shijiazhuang (Hebei), which included extensive interviews with store managers & parents.
Results
Our analysis yielded multiple red flags which suggested a very high risk level for the investment being contemplated. First, the overall store level economics did not look compelling. Second, primary research suggested that parents did not view a children’s cooking enrichment program as a priority use of their children’s time. We also found several accounting irregularities which were concerning. The company accepted our recommendations and did not peruse the deal.