Marvel Entertainment Group

2311 WordsApr 24, 201110 Pages
[pic] Case: Marvel Entertainment Group Corporate Finance 1 Marvel’s bankruptcy In December 1996, Marvel Entertainment Group and the three holding companies entered bankruptcy. Why did they file for it and why were the problems caused; bad luck, bad strategy or bad execution? And did Perelman’s pre 1997 decisions contributed to Marvel’s downfall? In our opinion, the bankruptcy of Marvel was caused by a variation of problems. These problems can be divided into issues in the overall industry (bad luck) and the negligence of Perelman himself (bad strategy). In general, the whole comic book industry shrunk, because of the rise of other forms of entertainment, such as video…show more content…
However, this initial plan was not used by Marvel. The restructuring plan after the bankruptcy was as follows: First, Andrews Group wants to invest $350 million in Marvel in return for 410 million new shares. That means, Perelman would receive a share for about $0.85 (although the market value at that time was over $3) and would strengthen his controlling stake in the firm. Second, Marvel wants to acquire Toy Biz because it had close business relation with Marvel. Furthermore, Toy Biz could provide large revenues for Marvel since it generated $60 million of cash flow per year, which could be used to service Marvel’s debt. Third, public bondholders exchange their debt for equity in the new recapitalized firm. The question remains if this plan could help Marvel to get back on its feet again. The proposed changes in strategy did not include major restructuring ideas that would affect the whole operating business. The "dying" business of comic books would not be revived in the long run through new equity. Marvel was losing its core fanbase that would buy its toys and comic books. The setback in sales because of new forms of entertainment would not be helped through the acquisition of Toy Biz, since more supply does not make up for a decrease in demand. This acquisition was one of many where Perelman ignored industry signs and went his own way, causing a large part
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