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Midas Case Study: How to Enter the Brazilian Automotive Aftermarket?

Published on:
5 minutes

Denis Gromb, Antin I.P. Chair Professor of Finance at HEC Paris, and HEC Paris EMBA graduate François Sauvageot present their business case study “Midas in Brazil”. Midas is a global chain of auto repair and maintenance centers, and the case connects several key themes such as franchising, the automotive aftermarket, valuation and joint ventures in a country renowned for its challenging business environment.

midas case study - aide entreprise

The “Midas in Brazil” business case study takes class participants for a peek under the hood at Midas. Mobivia, the European leader for mobility, owns the rights for Midas in some 100 countries and the case focuses on the possible expansion of its Midas network into Brazil.

The Muffler Installation Dealers Associated Service (M.I.D.A.S.) started in the U.S. in the 1950s as a network of auto repair outlets specialized in mufflers with a golden coating (hence the pun!). It is now a global franchising company and the plan for Brazil is therefore to establish a national network of Midas centers owned and run by local entrepreneurs, the franchisees. Developing and supporting the network would be incumbent to a master franchisee -- Midas itself, were it to remain in the driver’s seat, a Brazilian player chosen by Midas, or a joint venture -- which would collect royalties from the franchisees and then pay royalties to Midas, the master franchisor. 

The Brazilian automotive aftermarket has enormous potential and the Midas model of quality, moderate pricing and transparency would bring a refreshing change of scenery to local drivers. Yet, the cost of doing business in Brazil, nicknamed “Custo Brazil”, remains infamously high. In fact, under previous ownership, Midas tried to break into the Brazilian market but crashed and burned.

Mobivia must thus not only weigh a return to old Brazil but also decide whether to team up with a local partner in a joint venture. Knowledge of the local map of business would indeed facilitate the selection of franchisees and center locations and accelerate network development. A faster route may also involve converting an existing network of auto repair outlets into Midas centers.
But everything has a price and the numbers must line up: Mobivia needs to build a business plan and conduct a financial valuation exercise to assess and compare the economic attractiveness of the different options on the table. An opportunity for participants to get their hands dirty!

A case study about franchising and the automotive aftermarket

The case weaves several key themes together. Students must first acquaint themselves with franchising, a ubiquitous business form: Which activities are “franchisable”? What are the pros and cons of franchising? They must consider the challenges of entering an emerging market such as Brazil, and possible strategies to oil the wheels. Students must also translate Midas’ different strategic options into a financial model, evaluate each option through a discounted cash flow analysis, and set the terms of a joint venture.

Corporate finance is not math! So, having a strong strategic backbone is a plus for a case. This also avoids ‘silo thinking’ as class participants must rely on different disciplines and on their own experience. In that respect too, the case reflects François’ experience and knowledge of the automotive aftermarket, of franchising, and of Brazil where he worked on various marketing, road engineering, energy, and waste-to-energy projects. It was fun to learn from him and I hope people using the case will enjoy that as well.” – Denis Gromb

The case’s story and themes

The case originated from a “capstone project” by François Sauvageot, who was then an Executive MBA participant at HEC Paris. It is co-authored by François and Denis Gromb, a Finance Professor at HEC Paris. Mobivia provided data and information ensuring that, although numbers and names were changed, the case remained realistic and relevant.


Find “Midas in Brazil” business case, along with an interview of Professor Denis Gromb, on the Case Centre here.

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