1. Corporate Finance Case Studies
Welcome
Translation of bayern brauerei
Producing beer
since 1737
Family business
Bayern Brauerei
Presentation by Group 5
MBA Fulltime

2. 1. Rapid growth in sales 1989 reunification of formar splittet germany
(board) population 60+20=80 (+33%) roughly
Economy non existant or not a competitor
Western companies expanded rapidly
This company also (up to 20%)

3. 1. Reasons for rapid growth
Remarkable sales growth only in the east
From 0 % in 1989 to 18.4% of sales in 1992
146 % sales growth in the east ( )
2 % sales growth from 1989 to 1992 in the west
Completely new market in the east
Relaxed credit terms
Field inventories for distribution
Marketing Manager running the business
As visible in slide before, 2% west, and east up
As stated new market
2% 10, net 40 to 2% 10, net 80  receivables
No distribution network available in the east  field inventories  inventory
Focus on sales growth

4. 2. Sustainable growth 24,99% 25,00% 25,90% 25,55% 9,72% 10,25% 6,30%
1989
1990
1991
1992
Equity Retention Rate
24,99%
25,00%
25,90%
25,55%
SSGR = retained earnings / owners equity oder ret.rate * PAT / Owners equity
Maximum growth without raising external funds
ROE
9,72%
10,25%
6,30%
7,28%
Self Sustainable Growth Rate
2,43%
2,56%
1,63%
1,86%
Growth in Sales
4,98%
14,24%
9,14%

5. 2. Reasons for unsustainable growth
Retention of profits too low
Growth in sales is much higher than SSGR
Lack of market research
Sustainable growth only achievable through:
Higher retention
Otherwise:
Raise new equity (Shares, etc.)
Long Term Debt financing

6. 3. Increasing debt No increase in total debt Decreasing LTL
Increase only in STL
Debt is the only way to compensate growth rate
Increase in Inventory
Increase in Receivables
Cash surplus from 6m to 12m

7. 4. Accounting Break Even Chart
Deutsche Mark
(millions)
160
140
120
100 80 60 40 20
Revenue
Total cost
Variable cost
BEP = 540 Hl
Current Production is 667 Hl
M/S = 20 % or 160 Hl
CM =
DOL=1/MS =
Fixed cost
Hectolitres of beer sold (thousands)

8. 5. Financial Plan 8.8m DM in Plant and Equipment 8.6m DM in Warehouse
Dividends payout: 545, DM
Should not be approved:
There is no market for further production, if we get the same market share in the east, we are at this point now
We are producing beer, distribution is not our business  focus
It should not be financed with STL
Instead...
Rather cut inventories and receivables
Get receivables back to 2% 10 and net 40
Retain more earnings to finance further expansion plans

9. Managerial Balance Sheet
1989
1992
Cash
6764
12%
12283
23%
WCR
2549 4%
11585
21%
Investments
3911 7%
3914 7%
Net Assets and WCR (81%) financed by LTL and Equity (93%) 1989
Net Assets and WCR (70%) financed by LTL and Equity (85%) 1992
Cash (12%) financed by STL (7%) 1989
Cash (23%) financed by STL (15%) 1992
Liquidity Ratio from 3.71 in 1989 to 1.72 in 1992
Net Assets
44162
77%
26539
49%
57386
100%
54321
100%
STL
3765 7%
7884
15%
LTL
20306
35%
11066
20%
Equity
33315
58%
35371
65%
57386
100%
54321
100%

10. 6. Financially Health
Profitability (ROE) is lower than growth rate and decreasing
Growth in sales is higher than the SSGR
Times interest ratio declines, showing high interest rates on STL
Low retention rate
High reliability on STL
No application of financial and accounting principles
Liquidity ratio from 3.71 (1989) to 1.72 (1992)
Bad WCC-management
Max Leiter´s compensation?