The Panera Bread LBO case study discusses the situation of the firm from the viewpoint of a private equity fund. It allows students the opportunity to estimate the optimal projection for each bid scenario of the leveraged buyout.
David P. Stowell and Alexander Katz
Harvard Business Review (KE1153-PDF-ENG)
August 30, 2019
Case questions answered:
- Construct an LBO model for Panera Bread.
- Determine the optimal debt structuring for LBO.
- Estimate the optimal projection for each bid scenario and model each.
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The Panera Bread LBO Case Answers
This case solution includes an Excel file with calculations.
Introduction – The Panera Bread LBO
Panera Bread (PB) is a national chain of corporately owned and franchisee-operated Fast-Casual dining establishments. These restaurants are designed to reflect their core identity as a “wholesome food” concept chain centered around fresh baked goods and a welcoming environment for their customers.
With over 2,000 across North America, Panera Bread is poised perfectly to take advantage of the recent boom in fast-casual dining.
As a leading pioneer in this relatively new industry segment, Panera is seeking to establish itself via market share and further expand its existing competitive advantages in such a competitive industry.
Primarily aimed at affluent adults, fast-casual dining provides a new experience for restaurant-goers that is unique to the market segment. In addition, competitive processes and food quality well above the average fast-food supplement make this industry ripe for re-investment.
The problem facing Panera Bread today is the riskiness and competitiveness of the market segment paired with the speed at which Panera Bread expanded in the first place.
The threat of new entrants is palpable, and a strong customer base is extremely necessary to make sure that Panera retains its existing staying power.
With this exceptional staying power and past success, PB has attracted the attention of a private equity firm by the name of KLG. This firm is interested in initiating an LBO in order to capitalize on a buyout opportunity.
An analysis of the buyout opportunity at a calculated/determined premium is to be pitched to both KLG management and the managing director of Panera Bread for review and eventual decision.
Panera Bread has retained a strong market share at over 68% share in the industry’s revenues. This is massive and is only growing as the vast majority of growth in the industry is fueled by taking significant market share from other fast-food companies.
A more in-depth analysis of the LBO market indicated that not only will a…
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