...M&A, BARUCH COLLEGE, FALL 2012 Prof Harvey Poniachek Questions for Cooper Industries Harvard Case Study THE CASE SHOULD BE DONE BY TEAMS OF UP TO FOUR STUDENTS. The CASE WOULD BE PRESENTED AND DEFENDED IN CLASS BY TWO TEAMS. I EXPECT MANY OF YOU TO MAKE CLASS PRESENTATIONS BY UTILIZING POWERPOINT AND/OR OTHER MEANS. THE QUESTIONS BELOW WERE SUGGESETD BY THE AUTHORS OF THE CASE AND ADDRESS THE MAIN THE ISSUES, BUT YOU MAY EDIT / CONSOLIDATE THEM IF YOU FIND IT NECESSARY / CONVENIENT IN WRITING UP YOUR CASE. Cooper industries 1. If you were Mr. Cizik of Cooper Industries, would you try to gain control of Nicholson File Co in May 1972? ➢ yes o potential profit o COG from 69% to 65% o Saling expense from 22% to 19% o Leveraging European distributed system o Take benefits of the conflicts between VLN and Porter 2. What is the maximum price that Cooper can afford to pay for Nicholson and still keep the acquisition attractive from the standpoint of Cooper? As given in the case, Cooper Industries will get several synergies after the merger. 1) Cost of Goods sold of Nicholson could be reduced from 69% to 65%. 2) Elimination of the sales and advertising duplications would lower selling, general and administrative expense from 22% to 19% 3) Cooper will gain access to Nicholson’s strong European distribution system to sell its other hand tool lines. Based on the above factors, we prepared the pro forma statement...
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...Cooper Industries’ Corporate Strategy I. Situation of the company Cooper Industries was the manufacturing company have the three group of business. The three group business are Electrical & Electronic, commercial & industrial, and compression & drilling. All this group had created growth in term of revenue by doing acquisition. Initially, Cooper was the recognized leader in pipeline compression equipment. However, the company had developed production expertise and had built a reputation for customer service in the natural gas industry as well as extracted gas from underground wells. Electrical and Electronic. The E & E segment was Cooper’s largest in 1988, generating one-half of corporate sales and 57% of operating profits. Cooper had entered this segment with the 1981 purchase of Crouse-hinds. By 1988, E&E had four sub-segments, each representing quite diverse business, but all focused on the mature North American market that accounted for over 90 percent of segment sales. Commercial and industrial. In the commercial and industrial segmen Cooper participated in the non-powered handtool and window treatment business, and in the automotive aftermarket. In the Tool group, consolidation of acquisitions was completed and new manufacturing of acquisitions was completed and new manufacturing facilities constructed by 1988, and the company held the preeminent market position in most of its tool lines. Compression, drilling and energy equipment Compression and drilling...
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...Cooper Industries Inc. Based on the given information in the case study regarding the acquisition of Nicholson File Company by Cooper Industries, there is no question that Cooper should try to gain control of Nicholson. This decision is based on an analysis of the bargaining positions of each group of Nicholson stockholders which have disparate goals and needs that need to be met. In addition, an appropriate payment method and specific dollar value based on a competitor's offer and Cooper financial data was decided. The remainder of this paper will provide the analysis and rationale for this determination. Should Cooper Industries Acquire Nicholson File Company? Cooper Industries has been expanding through diversification since 1996. Cooper's requirements to acquire a company has three major components. The target company must be: 1. In an industry in which Cooper could become a major player 2. In an industry that is fairly stable, with a broad market for the products and a product line of small ticket' items; and 3. A leader in its market segment. When looking at the criteria that Cizik's company (Cooper Industries), set forth relative to acquisitions, the acquisition of Nicholson meets all three objectives plus has significant potential short and long-term potential. Cooper management feels that by eliminating redundancy and streamlining Nicholson's operations this potential can be realized. Currently, Nicholson's financial history boasts a 2% increase in profit...
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...Let’s MOTOR. ® Find a MINI Dealer at MINIUSA.COM * BOOT TO BONNET NO COST MAINTENANCE. MINI also wants to ensure the proper performance of your vehicle, so we offer No Cost Maintenance standard for the first 3 years or 36,000 miles. WARRANTY.* At MINI, our commitment to quality and customer satisfaction is clearly demonstrated by a 4-year/50,000-mile New Passenger Car Limited Warranty and a 12-year/unlimited-mileage limited warranty against rust and corrosion perforation. * ROADSIDE ASSISTANCE PROGRAM. The MINI Owner experience continues out on the road. You are only a toll-free phone call away. The MINI Roadside Assistance Program is available 24 hours a day, anywhere in the U.S., Canada or Puerto Rico. The program offers towing, lock-out service, on-site assistance and even custom computerized trip-routing services. And for a nominal fee, the MINI Service Card extends this service after the New Passenger Car Limited Warranty for as long as you wish. * BE part of the family. For a list of terms and conditions for all the good stuff above, visit MINIUSA.COM/SERVICE **MINI received the highest numerical score among mass market brands in the proprietary J.D. Power and Associates 2010–2011 Sales Satisfaction Index (SSI) StudiesSM. 2011 study based on responses from 24,045 buyers, measuring 19 mass market brands and measures satisfaction of new-vehicle buyers who purchased or leased their vehicles in May 2011. Proprietary study results are based on experiences and...
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...Cooper Industries Corporate Strategy * Reputable maker of engines and compressors to propel natural gas. * More than 150 years of Business duration. * Cooper Industries acquired more than 60 manufacturing companies in 30 yrs. Q1. What is Cooper’s corporate strategy * Cooper Industries’ main corporate strategy is broad diversification through M&A. * Cooper Industries acquired firms in order to lessen its dependence on cyclical natural gas industry and to exhibit stable earnings. * Cooper Industries acquired firms that had stable earning, a broad customer base and proven manufacturing operations using well-known technologies. * Cooper Industries had a good corporate level strategy of diversification. * Copper Industries acquired both related and non-related businesses. * As a result, Cooper Industries could exhibit stable earnings. * Reasons for Cooper’s diversification * Threats of its original industry : * Low growth level * Unstable market(cyclic) * Technology Issues * Expensive labor and high costs. * Cooper’s strengths : * Skilled labor and high technology that could be used in other businesses * Financially abundant. * In order to refrain from possible threats and maximize its strengths, Cooper chose to diversify its business both in size and scope. * By diversification, Cooper could achieve, * Update of processes and equipment ...
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...Re: Cooper Industries’ Corporate Strategy (A) Diagnosis: Cooper Industries’ growth depends on its widely diversification. From 1960 to the following 30 years, the company purchased about 60 manufacturing companies that increased the size and scope of Cooper Industries. With its experience and strength in “Cooperization”, it has been able to digest the companies it purchased and welded the company into a highly efficient, profitable, competitive business. But they acquired too much debt due to it diversified its business too quickly. It leads whether or not acquires Champion and Cameron Iron Works became to the biggest problem when the case was written, which would raise the debt-to-capital ratio to 55% to 60%. If they leave the problem unaddressed, they might risk bankruptcy in the future. Analysis: Both of Champion and Cameron Iron Works were in related industries, automotive and petroleum equipment, which were profitable businesses. Cooper Industries was already doing those two businesses. For the opportunities identified in the case have to do with the purchase of Champion and Cameron Iron Works, both of them have a strategic fit with Cooper Industries’ long-term plans. For example, Champion has a poor management, old technology, and failures at diversification. But Cooper Industries is good at this field. Cameron Iron Works had a biggest Compression and Energy Business Segment until 1981. But it was the smallest segment of Cooper Industries. Moreover, Cameron Iron Works...
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...COOPER INDUSTRIES, INC Nicholson File Early in 1972 Nicholson File had to stave off a take over attempt by H.K. Porter Company Inc. which controlled 30.5% of the company's stock. Porter made a cash tender offer to stockholders. However, Porter did not get enough stock to take over Nicholson. In trying to fight the takeover Nicholson File made several merge overtures to other companies like VLN Corp. A few years back, it had rejected an offer from Cooper Industries. Cooper Industries interest in Nicholson Cooper was interested in Nicholson because of its competitive strength in the hand tools industry. Nicholson had a 50% share for files and wraps with a very strong brand name and high quality line. It also had a 9% share of the 200 million hand saws and saw blades market with excellent brand & quality. It had a very effective and large distribution system across US, Canada and overseas. Cooper industries believed that Nicholson can achieve 6% annual sales growth as also bring down the cost of goods sold from 69% to 65% and selling and administrative expenses from 22% to 19% , thereby increasing its profitability. Cooper would be able to use Nicholson’s distribution system to cross sell Cooper’s hand tool lines in the industrial and consumer markets. Cooper anticipated that the Nicholson acquisition would lessen its earnings volatility and currently Nicholson is in the merger market to stave off the raid by H K Porter Company. 1/5 Valuation of Nicholson File (without...
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...market. Post-acquisition difficulties resulted because: (a) managers of the acquiring company did not deeply understand the target company at the time of the acquisition; (b) the acquirer imposed an inappropriate organizational design on the target as part of the post-acquisition integration process; and (c) inappropriate management incentives existed at both the top management and division level. (2) Measures of operating performance used in large sample studies are weakly correlated with actual post-acquisition operating performance. * University of Chicago and NBER, University of Chicago, and Harvard University, respectively. We especially thank Shel Erikson, Thomas Hix, William Berger, Michael Grimes and Joseph Chamberlain of Cooper Cameron, John Deakins of Cameron Iron Works, and James Ringler and Larry Skatoff of Premark for talking with us and making this study possible. We thank Steven Hoffman, Sherry Roper, and Bradley Thompson for excellent research assistance. Comments from Larry Berlin, Derrick Deakins, Marc Knez, Toby Stuart, G. William Schwert, Rene Stulz, and seminar participants at the National...
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...Ocean Carriers Case Expectations for Daily Spot Hire Rates Next Year Iron ore and coal imports will most probably decrease the upcoming year With the increasing supply of vessels should result in a market surplus By creating this surplus, prices will be driven down, since we will have limited demand and suppliers competing Average daily rates, based on historical numbers, have a direct relationship with the number of shipments. What Factors Drive Average Daily Hire Rates? u u Daily hire rates were determined by supply and demand Supply includes all those used in previous year, plus new vessels purchased minus all scrapped vessels New vessels usually were bigger and more efficient, hence fewer ships were needed to carry the same amount of cargo All factors such as age of vessel, size and costs of repair and maintenance come into play in this case Demand was changing due to shipping capacity. When it was high than the use of the vessel was longer. When it was low, then more scrapped would occur u u u Long Term Prospects Company policy not to operate ships older than 15 years Growth in the iron and ore markets Demand for capsizes to be high; increased exports of iron and ore u Uncertain on expected hire rates Rise in Australian and Indian ore exports Trade volumes higher: Need for new vessels to carry the increase in shipments Should we buy the carrier for 25 years? We will discount all of the Cash Flows at a rate of 6 percent We...
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...Why Do Cave Fish Lose Their Eyes? Why Do Cave Fish Lose Their Eyes? This article is provided courtesy of the American Museum of Natural History. Carlsbad Caverns National Park Deep underground there are caves where the sun never shines. If you found yourself in one of these caverns without a flashlight, you would see nothing at all; just total blackness. In some of these underground caves, there are fishes, crustaceans, salamanders and other animals that have evolved to live without light. For example, more than one hundred species of cave fishes live their lives in constant darkness. They depend on senses other than sight to hunt, eat and reproduce. Many of these species of fishes are blind or nearly blind—some don’t even have eyes. Yet they all evolved from fishes that could see. Somehow, over millions of years, these fishes not only developed the ability to live without sight—they lost the ability to see altogether. How did that happen? How can evolution cause a species to lose a trait? It’s a mystery that evolutionary scientists have been struggling to unravel. The search for an answer gives us a fascinating look at how evolution works. Regressive Evolution We usually think of evolution as a process in which species acquire new traits. But in cave fishes we have an example of regressive evolution, a process in which species lose a trait—in this case, the ability to see. Why Do Cave Fish Lose Their...
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...As mentioned in the letter before, I will be carrying out a series of testing. These tests are the cooper run, a Vo2 max test, the multi-stage fitness test and body fat percentage tests, there are two body fat percentage tests. The Cooper 12 minute run is a popular maximal running test of aerobic fitness, in which participants try and cover as much distance as they can in 12 minutes. The purpose of it is to test the individual’s anaerobic fitness, meaning the ability of the body to use oxygen to power the muscles whilst running. The way the test is set up is that cones are set up at several intervals around the track. The track will be a 100m2 rectangle/square. Participants are to run for 12 minutes around the specified area, they are allowed to walk but they are encouraged to run at maximal effort. At the end of the 12 minutes I, the researcher, will count the amount of laps the participant covered and work out the distance ran. The next test is the Vo2 max test. This test is designed to measure the individual’s aerobic power. This exercise is performed on an appropriate machine e.g. a treadmill or exercise bike. The exercise workloads are made to gradually progress in increments from moderate exercise to maximal intensity. Oxygen uptake is worked out from the measures of ventilation and oxygen the CO2 in the expired air. The results are shown as L/min (litres per minute). The participant is considered to have reached the vo2 max if the oxygen uptake has plateaued. The multi-stage...
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...Cooper Pharmaceuticals, Inc. | SLMT – 1 | Group – 7 | 13109 | Ankita Murali | 13141 | Raja Yakkala | 13508 | Arka Sinha | 13605 | Ankit Khurana | | PROBLEM STATEMENT The decision of Cooper Pharmaceuticals, Inc. (CPI) on terminating the services of Bob Marsh, a detailer who had twelve years of experience with their company and also had an unmatched rapport with many physicians and hospitals in the geographical territory assigned to him. ENVIRONMENTAL SCAN The Pharmaceutical industry witnesses a cut-throat competition with major brands having a hold over the industry. This industry utilized a sales force of detailers who played a major role in their sales. Their job was to persuade medical personnel to use and prescribe certain drugs. A typical CPI was responsible for about 200 physician and hospital accountants within an assigned geographic territory. CPI was a major manufacturer of prescription drugs for medical and dental professions. These products were channeled through drug wholesaler and then the drug stores for reselling to the general public. SWOT ANALYSIS ON MARSH Strengths: 1. Quick learner 2. Good people skills 3. Friendly nature with the customers Weaknesses: 1. Poor organizing skills 2. Poor planning skills 3. Poor attitude 4. Lack of enthusiasm 5. Lack of sincerity 6. Low knowledge of technical and promotion literature 7. Low reliability Opportunity: Bon Marsh had run successfully drug store and...
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...Cooper Industry Case Analysis Cooper Industry is an engines and compressors maker with a history more than 150 years. It had been a small company but with good reputation until 1960. In 1960, Cooper expanded its business by acquiring other manufacturing company. It had a famous process call “cooperization” which brought up with many highly efficient, profitable, and competitive businesses. In 1989, Cooper was considering more acquisitions. It first won the bidding with a $21-a-share tender offer and purchased the Champion. It also considered a $700 million bid for Cameron Iron Works. The strategic issue in this case would be whether or not Cooper should complete the purchasing even with a high financial risk and profound operational and organizational ramification. Fist let’s use Porter’s Five Forces to analyze Cooper Industry. Bargaining power of new entrants Level: Medium Cooper tried to fulfill their goals of growth and diversification through acquisitions, and they did success. The diversification allowed Cooper to do the business in many different industries. For example, Cooper began the diversification in 1967 when it acquired the Lufkin Rule Company- a hand tool business. After that, it acquired two more hand tool business companies in 1968 and 1970. Although there were competitors in all the industries that Cooper diversified into, the operation strategy makes Cooper have a stable market shares in different industries. Bargaining power of substitutes. Level:...
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...Cooper Industries. Inc If you were Mr. Cizik of cooper industries, would you try to gain control of Nicholson file co. in may 1972? Acting as Mr, Cizic we would pursue Nicholson aggressively for a number of reasons. Nicholson would complement Cooper’s hand tool business, with additional synergies to be had through cost cuts and sales opportunities. The acquisition would also be in line with Cooper management’s long term growth and acquisition strategy as Nicholson is undervalued relative to its book value, and is in a niche which will compliment Cooper’s existing business. Our analysis shows there will be opportunities for operating synergies resulting in reduction of cost of goods sold from 69% to 65% of sales, and reduction of selling and general administrative expenses from 22% to 19%. Moreover, Nicholson is growing at 2%, which is well below the industry average of 6% and Cooper can move Nicholson towards that potential. Nicholson also has strong distribution systems in Europe, which can be a great asset for Cooper, as Cooper has no distribution in Europe. Cooper products are generally sold into industrial markets while Nicholson products have a stronger presence in the consumer market. The merger would give Cooper the opportunity to increase sales into the consumer market through Nicholson’s sales channels, and sell Nicholson’s products into the industrial markets through their own sales channels. What is the maximum price that coopers can...
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...Sample Answer For Cooper Industries Case Study Cooper Industries Inc. is the manufacturer and leading producer of engines and big compressors for oil and gas extraction industry. The firm had been heavily dependent on oil and gas sector for its sales and major earning; fluctuations due to cyclic nature of industry concerned its management. Although long-term sales and earnings growth for Cooper had been above average, its stock was less attractive to investors due to higher risk and earnings volatility. Cooper’s earlier acquisitions resulted in diversity of markets but did not result in reduction of earnings volatility.To reduce the risk, management initiated an acquisition strategy to diversify its product portfolio. An acquisition criteria was established that called for acquisition of leading companies of their respective market segments. Cooper acquired three different companies under its acquisition strategy but failed to tempt management of Nicholson File Company for a merger three years ago. However now with Nicholson in play, there was an opportunity for Cooper to acquire a controlling interest in the company. In May 1972, Robert Cizik, executive vice president of Cooper needed some answers before proceeding with appropriate course of action for this opportunity. QUESTIONS 1. Should Mr. Cizik of Cooper Industries try to gain control of Nicholson File Company in May 1972? 2. What is the maximum price that Cooper can afford to pay for Nicholson and still keep the acquisition...
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