Case | HBS Case Collection | April 2005 (Revised September 2005)

Pegasus Capital: The Musimundo Decision

by Michael Chu and Barbara Zepp Larson

Abstract

The five managing directors of Pegasus Capital were meeting in June 2003 to make a go/no-go decision regarding the investment of Musimundo, one of the largest entertainment retailers in Argentina. Just four days before the planned closing of the sale, Pegasus' 50% partner in the purchase had dropped out, and Pegasus now had to decide whether to move forward with the purchase as a 100% investor. The Musimundo acquisition opportunity was the by-product of a massive economic crisis that had hit Argentina 18 months earlier. With a precipitous devaluation of the peso in January 2002, Argentina's real GDP had contracted by nearly 11% in 2002, the worst recession in its history. The Pegasus partners debated whether the Argentine economy would--or even could--rebound after such a disastrous fall and whether the music and entertainment market would ever again reach its precrisis levels. Furthermore, Pegasus' venture investment partner, a local retail chain, had dropped out due to nervousness about an increasingly volatile political and regulatory environment. Suddenly, Pegasus was thrust into the position of sole purchaser and needed to decide whether the risks were surmountable and whether the investment was worth making.

Keywords: Acquisition; Debates; Decision Choices and Conditions; Economic Slowdown and Stagnation; Financial Crisis; Music Entertainment; Investment; Business or Company Management; Risk and Uncertainty; Opportunities; Entertainment and Recreation Industry; Argentina;

Citation:

Chu, Michael, and Barbara Zepp Larson. "Pegasus Capital: The Musimundo Decision." Harvard Business School Case 305-093, April 2005. (Revised September 2005.)