Individual Case Questions:“Eskimo Pie Corporation”
Due by Thursday, April 13
You are responsible for handing in written answers to the following questions drawn from the Eskimo Pie Corporation case. You can work with others on this assignment, but each individual must hand in their own set of answers.
1. Why do the managers of Eskimo Pie want to find an alternative to the Nestle acquisition?
The managers of Eskimo Pie want to find an alternative to the Nestle acquisition because they do not want the company that they built to disappear. With an acquisition Nestle would restructure Eskimo Pie, and thus greatly affect all of its employees, primarily the managers. Nestle also has a history of terminating licensing arrangements, with the previous acquisition of Carnation for example. Managers would dislike this to happen to Eskimo Pie, considering its licensing arrangements was the primary line of business for the company in its past.
2. Why would Nestle want to acquire Eskimo Pie? Are there potential synergies such as economies of scale? Is Eskimo Pie worth more to Nestle than it is worth as a stand-alone company?
Nestle wants to acquire Eskimo Pie because it minimizes risk and reduces their rate of failure. Since Eskimo Pie was previously a main competitor in the industry, by acquiring the company Nestle consumes an even larger market share in the frozen novelty industry. There are potential synergies from an acquisition since the two companies are both in the same industry and create similar products. Most of the employees including management would not need to be duplicated. Marketing as well as distribution costs could be eliminated since the products will not need to be duplicated, and the products will be going to the same distribution center. Therefore, I would say that Eskimo Pie is worth more to Nestle than it is by itself.
3. What would be the capital structure (i.e., debt ratio) of Eskimo Pie after its IPO if Reynolds...
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