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GameStop Presented by HEC CONSULTING
Aditya baid
Loretta chan
Emilie l.cayer
Neha sharma Presented to
BARNS AND NOBLE BOARD<br>
Can GameStop be a viable company in a disrupted industry?<br>
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What are the key issues?<br>
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What is the current landscape for GameStop? Internal Analysis GameStop has high and engaged consumer base but keeps on being faced with declining sales margins and operating losses<br>
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What is the current landscape of the gaming industry that could affect GameStop? External Analysis The market size growth is faced with high threats such as protective policies and increased competition from giants<br>
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What is the competitive landscape ? Compare to GameSpot, these retail giants and online competitors all have an advantage of offering high product diversity (household products, computer products, etc.)<br>
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What is the industry landscape ? Extremely competitive industry with game development companies having a high power advantage over retailers High High High Medium High<br>
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What are the options ? Diversify offering by adding revenue stream (e.g. acquiring a mobile gaming company)
Redesign business model
Take advantage of the store square footage (e.g. VR gaming area and e-sport team)
Change to a subscription game model
Restructuring the business and sell<br>
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Diversify offering by adding revenue stream (e.g. acquiring a mobile gaming company) Diversifying offering will not solve the profitability issues GameSpot has and high risks of diluting their current asset<br>
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2. Redesign business model A. Take advantage of the store square footage (e.g. VR gaming area and e-sport team) Spending capital on underperforming assets with high risk of disruption<br>
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2. Redesign business model B. Change to a subscription game model Model easily replicable by game creators and competition already offering the model in a more efficient way<br>
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3. Restructure GameStop’s business and sell Exit quickly to capture gains and avoid long-run losses<br>
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What are the criteria ?<br>
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Options against criteria<br>
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Can GameStop be a viable company in a disrupted industry? No immediate solution solves the profitability issues GameStop has encountered and only selling will prevent an even more important loss.
We recommend restructuring and selling as the best option.<br>
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Implementation Step 1: Restructure GameStop’s business Hire strategy consultants to perform strategic analysis on GameStop’s business outlook and profitability
Identify and close down stores in countries/regions that are unprofitable to reduce costs and increase profitability:
Understand the lease terms to estimate the timing for closing each store
Understand the staff hired by each store and possibility to relocate to other stores
Understand how the closure will improve the company’s financial forecasts
Note: We need the information of each country/region for further analysis
Comply with the regulatory requirements under the US listing rules<br>
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Implementation Step 1: Restructure GameStop’s business Resource checklist
Hire restructuring consultants to coordinate the consolidation
Hire HR consultants to advise on staff compensation and execute employment termination for store closing
Hire PR consultants to communicate the news to the market and public, but do not disclose the intent of sales before completing the closing of stores<br>
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Implementation Step 2: Sell GameStop Perform sell-side due diligence to identify potential deal breakers. Based on the issues identified, make applicable improvements
Reach out to potential PE buyers who would perform buy-side due diligence
For buyers displaying interests, negotiate pricing based on financial forecasts and the valuation of assets of GameStop
Obtain approval from minority investors for selling the sales. Conclude the sales and purchase agreement<br>
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Implementation Step 2: Sell GameStop Resource checklist
Hire sell-side advisors to coordinate on the transactions (e.g., manage data room and monitor the progress of all advisors) and communicate with potential buyers
Hire legal advisors to perform legal due diligence and handle all compliance requirements (i.e., gaining approval from the US listing authorities and disclose information under the listing rules)
Hire financial advisors to perform financial due diligence and assist in deal price valuation<br>
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Implementation timeline<br>
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Finance Current situation GameStop’s financial outcome in 2018 was generally unsatisfactory:
Decrease in net sales by 3.1%
Decrease in net income by 2,039.5%
Sharp decreased in net sales of pre-owned and value video game products by 13.2%
Improving cash position (US$1.6 billion in 2018) due to increase in account payables and goodwill impairment<br>
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Finance Goals of re-structuring the business<br>
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Finance How to cash out the investment with our plan This is a preliminary analysis and you need to hire valuators for further detailed analysis:
Stop the bleeding in 2020 by closing unprofitable stores which leads to positive financial profitability forecast from 2021
Good EBITDA of GameStop means a good position in deal valuation
Give consideration to the value of key assets (i.e., subscriber information of GameStop)
Benchmark with previous similar transactions to determine pricing<br>
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Finance Implementation costs Fully financeable by your current cash position of US$ 1.6 billion<br>
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Risks<br>
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Selling is the only viable solution<br>
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Thank you Questions ? Presented by HEC CONSULTING
Aditya baid
Loretta chan
Emilie l.cayer
Neha sharma<br>
