Cirque du soleil : case study debriefing

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→ brand equity management

Value of it: 3,5 BILLIONS

→ Brand attract employees and shareholders

People come to work at circles because of their values, people sunstanability

As the Sheikh over value or undervalue the values (7OOM$) of the company?

Why 700M?

Total world revenue of Cirques

Benchmark

Market Cap. / Revenues = multiple

→ 5 times the world revenues

Market Cap: Share price* N° of share outstanding

→ It has been over estimated

evaluate a company: discounted cash flow analysis

Cirque’s FAIR VALUE OF EQUITY 2 720 $US

Value of 20% Stake: 544 $US

So, what is expected in return?

Cirque Prospects for profits:

Why should I over-paid for 20%?

Will I be satisfied with my devidences?

We are going to make profit with the new show so we will redistribuate it

S. AL M. should be satisfied.

→ It is totally absurd according to the number (R. worlds ROIC: 1,26%) He will have to wait so many year to have is money back (700M$)

What is the hidden motivations?

Anticipation speculation

Benchmark the value of the share on revenue wich are growing 11% if he speculates its gonna take 5 years to have 1 087M$ thanks to the other show in the other market and the growing evolution.

Interest rate with a bank

I= (FV/PV)-1

You need a interest rate of 9%

So you have to find a bank which propose this interest rate.

Or

N=log(FV/PV)/log(1+i)

(1087/700) / (1+0,023) = 19,4

How many years do we wait?

19 years

Cost of equity?

Control decision that youre making to be sure what it pkanned works

Voting rights/ volume rights

Cost of the equity is accountability

→ TOTAL COST OF THE DEAL

What does it change if you buy 20% of the share at 544$ or if I over value and I pay 700M$

Value of 20% Stake ($M) Voting rights

544 20%

700 26% → blocking minority → to be able to oppose marketing decision/operational decision

→ Strong argument to criticise blue ocean

Guy Laliberté sells, he gives the blocking minority. For him business is a game so he took the risk.

They went to Macau, cirque lost 12,6 M$ for 3 consecutives years

Revenues CA 21 842 800

Operating Income:

Tokyo: They lost 10,7M for 3 consecutives years

They thought about a world tour for 3 years

Number of world arena 122

471 268 082M Target

They thought to make a show on Jackson but then he died.

Guy Laliberté make a space trip to create a buzz around him (35M$)

→ take pictures and make a book

Dubai had a debt of 60B$ and no cash to refund

Dubai selling his assets

That’s why we never seen a cirque in Dubai

Who buys back the share ? No one because he had speculated so much

So if you have a shareholder with pressure, no cash, and asset no assets want to buy

Only option: Plan social – Lay off??

→ stop all the show in Japan and Macau (after 3years)

→ they stopped some show in USA (a year after the lay off??)

→ Montreal: 400 people will be lay off too

DECISION: Buy back the shares (half of the stick for 450M$)

They go bankrupt

Cirque’s debts crisis: Total outstanding payments: 744,5 $US

Bank overdraft: 376,8$US

TPG

Guy Laliberté: 10%

Caisse de dépôt du Québec: 10%

Cirque new business model:

(fond d’investissement)

Not resident show anymore (only USA)

Touring show (++++)

Cirque performs in very small theatre (bateau, croisière)

Shareholder of Club Med

Who is in blue ocean? Franco Dragone (trailer on YouTube)

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