Question.3176 - = Scenario: Four years ago Penny and Associates, LLC located in NYC, USA has bought a license from Manchester United Football Club to use their intellectual properties (logo, name..etc) in North America. The agreement between the two parties was that MU will own 10% (worth $1,500,000 at that point of time) of Penney and Associates LLC in exchange for the license to use the club's intellectual properties. Penny and Associates invested 15 million dollars in this company. The company opened two combined side-by-side stores and sporty bar-restaurant in Manhattan, NY and another one in San Fran, CA. They named the bar and store as "Red Devils bar & grill" and "Red Devils Store" respectively. They offer the fans of Man U to watch the matches in a sporty atmosphere where you can eat, drink and buy Manchester United's t-shirts, jerseys, and other souvenirs. Unfortunately, the two stores and bars are not doing very well. In fact, the business is not covering its costs, not to mention making some profit. Penny & Associates need extra 5 million dollars to save the company. This 5 million dollars will be used to open 2 new places in Miami, FL and another one in San Diego, CA. The company did a study across the nation and found that soccer is among the top sports Hispanic Americans follow. The company is targeting these communities and also trying to promote soccer among all Americans communities. In order to do that, the company is planning to do some advertising and promote Manchester United in the US. The company is going to bring Manchester United to play a game in the US against LA Galaxy this summer. In order to save their investment the company is offering 40% of its equity for 5 million dollars. Leaving the Man U's 10% not effected and 50% to the original owners. Pre Money evaluation: Ownership Investment Worth of Investment Penny & Associates 90% $15,000,000.00 $15,000,000 Manchester United 10% $0.00 $1,500,000 Total 100% 15,000,000.00 $16,500,000 Post Money evaluation: Ownership Investment Worth of Investment Penny & Associates 50% $15,000,000.00 $9,000,000 Manchester United 10% $0.00 $1,800,000 Investor 40% $5,000,000.00 $7,200,000 Total 100% 20,000,000.00 $18,000,000
Answer Below:
Risk factor of the scenario Risk management is traditionally viewed as the process of identifying and assessing risk and then developing strategies to manage it. It is, however, important to recognize that the sports world is different from traditional business and therefore business management tools are not always applicable for the running of sports federations. We all know that sporting industries or Sports Company, as we say, is a booming one which lures millions of people across the globe. Different factors aids in making this industry a successful one. But, besides being a gaining one, there also number of factors which make it risky and thus making it profitless. There are numerous companies which duly run on sports basis. For example the company opened two combined side-by-side stores and sporty bar-restaurant in Manhattan, NY and another one in San Fran, CA. They named the bar and store as "Red Devils bar & grill" and "Red Devils Store" respectively. They offer the fans of Man U to watch the matches in a sporty atmosphere where you can eat drink and buy Manchester United's t-shirts, jerseys, and other souvenirs. The industry would definitely grow because the sports industry is growing. Now there are many risks involved with such kind of works. Firstly, what happens if a new bar cum restaurant opens up in the nearby place….?? Surly the profit margin will slide down. So competition in the market influences the economic growth of such industries. We also look into the matter that if such restaurants or bars fail to satisfy or meet the demands of the consumers than their business will be ruined like hell. Lastly, advertising factor matters a lot, now it requires investment for a company to advertise themselves. Even after being advertised, if the companies fail to meet their profit demand than the entire system for them will be a failure. INDUSTRY REASEARCH OF THE SCENERIO The craze for sports ha s become so famous among the people that out of its popularity a new industry called sports industry has cropped up. Consumer interest in sports is gaining momentum in the recent years due to the media coverage of the sporting events. The media has made sporting events popular among the people whether it is young or an old fell. T.V. and internet sports coverage also serves the medium to make sporting events more and more accessible to the masses. The sporting events getting famous has established as main stream entertainment. The sports stars are getting the status of a celebrity. This is the reason that increasing the number of children, young people as well as adults are attracted to sports as a professional career. The sports industry has witnessed growing number of female spectators and players especially in basketball, badminton and tennis. Further there are number of reasons why sporting industry is considered as booming one. Besides being a career option, it is now also a symbol of glamorous world. We also know the fact that when sports combine with glamour, people are lured to watch it. We have the living examples of IPL where different bollywood stars have their own cricket team. In fact the sports stars are paid higher for an advertisement than any other stars belonging to different field. There are also numbers of companies which duly run on sports basis. For example the company opened two combined side-by-side stores and sporty bar-restaurant in Manhattan, NY and another one in San Fran, CA. They named the bar and store as "Red Devils bar & grill" and "Red Devils Store" respectively. They offer the fans of Man U to watch the matches in a sporty atmosphere where you can eat drink and buy Manchester United's t-shirts, jerseys, and other souvenirs. The industry would definitely grow because the sports industry is growing. It would provide an added advantage to the people where the people would able to watch the matches in sporty atmosphere as well as they would be able to eat and drink and can buy things such as t- shirts, jerseys etc. the scenario would grow because Sports, besides being a career option or a mode of entertainment is now more often considered as a ‘religion’. A religion which runs in blood. This sporting industry will always grow, in every passing season, till this earth revolves and rotates.More Articles From Finance
.ico)
.ico)
.ico)
.ico)
