Facts of the Case
Pinnacle is a small, publicly held Indiana-based machine tool company which is currently losing market shares due to aggressive pricing which have an impact on its profit margin. Don Anglos, Pinnacle’s CEO, heard a credible rumor that a chief competitor of Pinnacle is planning a hostile takeover of Hoilman, Inc. Don Anglos has to decide whether Pinnacle should attempt to acquire Hoilman, Inc., a company known for its cutting-edge sensor technology and communications software developed to monitor robotics equipment. Don Anglos knew Hoilman well due to the exploratory talks he conducted on a failed plan of a joint venture. By acquiring Hoilman, Pinnacle would be able to transform into a high-tech service company that provides top-notch service far more sophisticated than its standard maintenance and service contracts by developing software that could transmit real-time information to its customers’ equipment. Don was a problem-solver and a proven track record of successfully spotting new market opportunities. He believes that acquiring Hoilman would be a good place to start. This option will be gone if Hoilman will be sold to another firm. Jennifer Banks, services division head, was enthusiastic about the acquisition and the new strategy describing it as “chance of a lifetime.” Sam Lodge, CFO, disagrees on Don’s plan stating that “getting into service business is a mistake” and Pinnacle’s recent profit drop had not escaped Wall Street’s attention and further negative impact might scare investors. There’s uncertainty that going to a service business would make the company on top considering the number of competitors.
II. DIAGNOSIS AND ANALYSIS OF CAUSES
Should Pinnacle acquire Hoilman Inc. by trusting Don Anglo’s instincts or
consider Sam Lodge’s factual concerns and position?
1) To evaluate the decision steps taken by CEO, Don Anglo and the Pinnacle team on the new strategy of acquiring Hoilman, Inc.
2) To provide alternatives and address the concerns raised by the CFO, Sam Lodge.
• CEO has proven track record on new opportunities
• Services Division Head is very enthusiastic about the strategy
• Don Anglos has prior knowledge on the company (Hoilman, Inc.) that he wants to acquire
• Don Anglos’ instinct is strong towards this new project
• Pinnacle had relatively healthy earnings and had potential for growth
• Anglo had managed to pushed the company’s revenue growth and increase market share
• Support of the Pinnacle team for the acquisition is not firm (Resistance from the CFO and some senior managers
• Company is not in the position to embark on new project that would risk the company’s earnings. • There is uncertainty if acquisition would yield a positive result • Aggressive pricing chipped away at the company’s healthy profit margins
• Develop a software that would make them ahead of their competitors • Acquisition will transform Pinnacle into a high-tech service company • Increase company’s profit margin
• Acquisition of Hoilman would protect the company from impending takeover by a chief competitor.
Analysis of the Problem
Don Anglo and the members of the senior management team is facing one of the crucial parts of good management which is good managerial decision making. Anglo and his managers are encountering a situation which is unique and will have critical consequences for the company thus, they have to make a non-programmed decision on whether to acquire Hoilman Inc. or not. Whether to acquire Hoilman, Inc. will involve risk and uncertainty. Even though Anglo knew Hoilman well because he had exploratory talks with the company, the future outcomes associated with the acquisition still poses a risk...