Case Study -Cooper Industries

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Case Study -Cooper Industries

By | September 2005
Page 1 of 9
Cooper Industries
Case Study
Jonathan De Leon
Ann Lewis
Mary J. Roy
Crystal Vincent

University of Phoenix Online
Advanced Problems in Finance
FIN 545
William Crockett
September 5, 2005

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 annually but this percentage is way below the industry average of 6%. Cooper management proposed that if Nicholson stops selling to every market, increased efficiencies would result and cut cost of goods sold from 69% of sales to 65%. It was also suggested that the acquisition could lower...

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