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Case Analysis—Jim Southern

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Case Analysis—Jim Southern
Case Summary:
It was June 28, 1984, Jim Southern, cofounder of Nova Capital Corp, was within 48 hours of signing a Purchase and Sale Agreement to buy American Printing, Inc.’s business forms division. This division was profitable, it had a big market share, and the market was mature and stable. Although this company was very attractive for Jim, this transaction still had some shortcomings such as it is highly leveraged; Jim seemed to buy a “pig in a poke”; and he have to personally guaranteeing $4 million of accounts payable while his net worth was less than $100,000. With both debt and equity financing conditionally in place, Jim Southern had to make up his mind at once.
Case Analysis: 1. What factors create the opportunity for Jim Southern?
First of all, Jim Southern was an MBA from Harvard Business School which brought him substantial business knowledge and broad networking opportunities. Jim first heard this opportunity from his professor Tom, who finally introduced Jim to the CEO of American Printing, Inc. Without Tom’s help Jim won’t get this opportunity so easily.
Secondly, Jim knew clearly about what kind of business they are seeking. He decided the formal criteria, such as high current assets and Sales $5 to $40 million, for screening the target business, which save Nova a lot of time and money and increased the likelihood of a third-party referral.
Finally, Jim was good at seizing the opportunities. Although young and lack of experience, Jim didn’t make O’Leary disappointed after a warm conversation. What’s more, Jim was brave that he dared to use high leverage to acquire this business, and the debt to equity ratio is almost 15:1. 2. How attractive is this opportunity for Jim and his investors? For American Printing? For the lenders?
For Jim and his investors, American Printing, Inc.’s business forms division was

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