Address the following questions in a 4-5 page write-up of the Massey-Ferguson Case to explore how financing and business decisions are linked:
1)Assess the product-market strategy Massey pursued through 1976. Compare Massey's strategy with those of its leading competitors. How successful and sensible was their product market strategy through 1976? 2)Characterize and assess Massey's financial strategy from 1971-1976. Did it complement the product market strategy? How did their financial strategy compare with their competitors? How sensible was their financial strategy? Should they have had a lower or higher leverage? Do you approve of their debt policy? Explain. 3)What went wrong after 1976? Review macro, industry, and firm factors. 4)How did Massey respond? How did its competitors respond? What were the consequences for Massey? 5)Assess the various alternatives at the current stage of Massey's difficulties. What options are available for alleviating Massey's financial problems? How could Massey be extricated from financial distress? 6)As a financial advisor to Massey's management, what refinancing plan would you propose? Give particular attention to the various interested parties: shareholders, lenders, employees, governments, and management. 7)Why, fundamentally, did Massey get into financial trouble? Were a refinancing plan successfully executed, what would be the outlook for Massey's future? What alternative actions by management would have reduced the severity of Massey's financial difficulties? 8)If you were Deere in 1981, what strategy would you pursue? 9)Summarize this case by explaining why the capital structure decision mattered so much in this industry.
Capital structure case: Massey-Ferguson Ltd (1980)
This case seeks to discuss the determination of a target debt policy consistent with business risk and competitive risk, exploring the difficulties encountered by a firm with too much debt for...