Growing for Broke

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BACKGROUND

One of the most common arguments for mergers and acquisitions is the belief that "synergies" exist, allowing the two companies to work more efficiently together than either would separately. Such synergies may result from the firms' combined ability to exploit economies of scale, eliminate duplicated functions, share managerial expertise, and raise larger amounts of capital. These distinguishing features had made Nicholas Anaptyxi,CEO of Paragon to battle it out with his colleagues to acquire MonitoRobotics.The case study portrays Nicholas as a visionary and a hard-driving builder who belonged to the same thought of train as his father. They both believed that to get better they had to grow bigger. He had worked in WRT,Cleavland where he climbed up the ranks due to the mere fact that he had the ability to spot new market opportunities and helped bringing in the profits and revenues. His urge to expand WRT was always suppressed as the people at its headquarters didn’t favor the decision. So he didn’t have second thoughts when he was offered a position to manage Paragon at Ohio.Paragon,was a thriving machine tool company that was built around a line of high end machines of aerospace engines. However the market for their product was essentially stagnant and foreign competition had started to take its toll. Paragon had began to face brutal cyclical economic swings. Nicholas had launched a number of initiatives to surpass the obstacles. But these initiatives were short term investments for long term goals. The profit margins had slipped and his colleagues became skeptical.Inspite of the year on year drop in earnings, Nicholas wanted to acquire MonitoRobotics to give Paragon a powerful presence in the fast growing business. Paragons service division accounted for less than 10% of the revenue. So to outrace Bellows&Samson,Pragon had to acquire Monito Robotics which was a breakthrough opportunity.William Liitlefield,CFO,being the pessimist he is, argued...
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