Mcbride F.S - Fin370

Topics: Initial public offering, Public company, Mergers and acquisitions Pages: 6 (1572 words) Published: August 8, 2011
McBride Financial Services

FIN 370

McBride Financial Services

A one stop mortgage provider is the marketing strategy McBride Financial Services use to sell its product in the five states where the company operates, Idaho, Montana, Wyoming, North Dakota, and South Dakota. McBride’s business philosophy is to provide each customer with efficient and effective processing of mortgage application from inception to closing. The company prides its self in offering preeminent low cost mortgages to professionals, retirees, families, and individuals using state-of-the-art technology.

In this paper the members of group A will look at McBride Financial Services project to expand its operations and three financial options available to the company. Members of the group will look at strengthens and weaknesses of the approach, opportunities of each approach and the treats that is likely to occur with each approach. The team will analyze the options the company will face to see the option that would best fit the entire company but more so the stockholders.

Strengths of each Approach

McBride Financial Services is a privately held virtual organization that wants to expand operations, and is faced with three options for expansion:

• Going public through an IPO

• Acquiring another organization in the same industry

• Merging with another organization

Team A has defined the strengths of each approach for McBride Financial Services by doing a SWOT analysis. The strengths of McBride going public through an IPO is the gain of capital. An organization like McBride will raise a large amount of cash with going public. McBride trading in the markets they will have more liquidity that will make it easy to have employee stock which will interest potential employees.

Acquiring another organization in the same industry will expand McBride Financial into more effective management. Acquiring a new organization can allow an organization to eliminate ineffective management that has not produced growth for the organization.

McBride Financial merging with another organization will increase the long term profitability by expanding their operations as an organization. By merging with another organization McBride will have tax benefits that they currently do not have due to the level of earnings. Also another strength for McBride is the complementarities in financial slack that will create wealth for the organization.

Weaknesses of Each Approach Strategy

Each strategies weakness that McBride Financial is considering will be addressed. The first approach addressed is the IPO. The IPO is a very costly approach and if the company does not have enough capital this would not be a good option. Considering an IPO may expose the company to a takeover and possible loss of control. With an IPO McBride could face legal liabilities. IPO’s take an enormous amount of time and attention going public. IPO’s are not guaranteed to be a successful undertaking.

The second strategy for McBride Financial is the merger. The merger must be approved by votes of the stockholders. Mergers can cause disruption in the business operation from difficulty in making decisions. Mergers sometimes cause changes in staff. Managers have to decide which staff members are necessary to run the business, and which staff will be eliminated. If McBride Financial becomes too large it can lead to higher unit cost.

The final strategy for consideration is the acquisition. McBride Financial Services must consider the fact the acquisition is a high risk strategy. McBride may purchase the wrong business at the wrong price for the wrong reason. There could be a clash of cultures between different types of businesses. The clash of culture could reduce the effectiveness of the integration. The acquisition could cause the employees to become less motivated, especially the management staff....

References: Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial management: Principles and applications (10th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall. Keown, A. J., Martin, J.D., Petty, J. W., & Scott, D. F. (2005). Financial Management: Principles and applications (10th ed.) Upper Saddle River, NJ: Pearson/Prentice Hall.
McBride Financial Services. (2005) Retrieved from
Mergers. (n.d.) Disadvantages of Mergers. Retrieved from, f.html?cat=3
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