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Tad O'Malley: The Investment Conundrum Case Solution

Solution Id Length Case Author Case Publisher
1413 922 Words (4 Pages) G. Felda Hardymon, Josh Lerner, Ann Leamon Harvard Business School : 808125
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The fragrance & flavours industry is based on the demand for food and other household consumption products. The developing countries have low growth national product which allows them to create more room for the sales growth vis-à-vis fragrance and flavours products. The company is not that mush saturated due to the fact that the barrier to entry is huge as distinct needs of the large customer are satisfied by the specifically designed team that work as an extension of the research and development function of the customer. That is the reason large multinational corporate giants are successful in retaining the customer pool and minimising the competition. The major players in the industry are operating internationally. The profit margin for the industry ranges from 15% to 20%.

Following questions are answered in this case study solution

  1. Overview of Fragrance & Flavours

  2. Evaluation of 3F AG

  3. Conclusion and Recommendations

Case Analysis for Tad O'Malley: The Investment Conundrum

2. Evaluation of 3F AG

3F AG is a German based company that offers fragrance and flavour products to worldwide market. The company is currently facing some lack leadership from the top management although the company good prospects of success. Currently, Tad O’ Malley is looking to evaluate the buy-out option and articulating the strengths and weaknesses of the company. Empire is considering to back a team that would consult the management to use the resources in an efficient manner and reduce the cost. This would lead to re-achieving the profitability and growth goals. A detailed analysis of the pros and cons of this buy-out option is discussed the following.

• Pros

3F AG is one of the leading developer of fragrance & flavours is the most important aspect that is associated with the company. The clients are very loyal owing to the fact that the company brings innovation the product world and maintain strong relationships with customers. The supply chain function at the company is strong enough to be responsive to the customer needs through creating a value throughout the production chain.

Moreover, the cash flow of the firm are positive and indicate the company’s ability to generate profitability. This would ease up the financing necessary to continue operation as the banks will be less reluctant to lend money. As a matter of fact, several banks have already shown their intention to issue a long term debt for the firm.

There is also an opportunity to tap the markets internationally that are untouched as of now and company through utilising its resources effectively and implanting cost reduction strategy can enable the company to derive results in the lost account areas. The company has a significant resource full staff however the lack of reasonable leadership is letting them lag as compared to the industry benchmarks.

In addition to that, the demand for products such as non-obesity products offers a whole new market and opportunity to grow and derive success in fast paced commercial environment. The fragrance industry is largely regulated by the Government and subject to different guidelines more focusing on the environmental impact and sustainability. This would increase the barriers to entry for the new entrants to comply with these increasing regulatory standards. Lastly, from the Empire Investment company’s point of view, this is a healthy buy out option which is expected to offer 4.5% sales growth in fragrance division and 7.1% sales growth in flavours division. The operating profit of 72% for flavours division is also seen outstanding.

Moreover Empire Investment has several options for the exit planning strategy. They could either sell the whole business or sell the each division separately as there is a rise of interest shown by the rivals that are already operating the market. Other option could by to make initial public offering and counties to running the operations and focus more on organic growth after the IPO.   

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