Yeats Case Study

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I. Executive Summary

In May of 2000, Yeats Valves chairman and CEO, Bill Yeats, met with his consultant and fellow board member, Kate Porter, to discuss the final negotiations regarding the acquisition of Yeats Valves by TSE International Corporation. Although the social terms of the merger had been discussed, no specific details had been settled. Organized in 1980 for engineering and developmental work on specialty valves and heat exchangers, Yeats Valves and Controls Inc (YVC) had a reputation for engineering excellence in the most complex phases of the business. YVC derived 50% of its profits from special applications for the defense and aerospace industries as well as prime contract work for the government. With the introduction of new products for the aerospace and defense industries, YVC’s first quarter sales in 2000 grew by 20-25%. YVC’s R&D confidence and management efficiency brought numerous merger propositions, and as Bill Yeats considered his nearing retirement, he decided that selling YVC was critical in upholding his company’s reputation. Along with retirement, many reasons existed that made an acquisition necessary for Yeats Valves. First, YVC needed a deep pocketed partner in order to expand; large investments would be needed in order for the company to continue R&D of new products. Second, Yeats would gain access to a large marketing and distribution network if acquired. Third, a purchase would allow YVC to gain production know-how for high-volume manufacturing; and finally, the trend of consolidation in the industry had increased over the last year. Bill Yeats also considered alternatives to the proposed acquisition with TSE: a possible merger with the defense contractor Rockheed-Marlin, establishing a joint venture with TSE, or moving forward alone. After evaluating these alternatives, Yeats decided that the acquisition by TSE was best choice for the company. By May of 2000, the social and financial terms still needed to be...
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