Capital Mortgage Insurance Corporation
Case 1: Capital Mortgage Insurance Corporation
Background
Capital Mortgage Insurance Corporation (CMI) is a wholly owned subsidiary of Northwest Equipment Corporation (NEC). NEC expects Frank Randall, company president; to build CMI into a larger more diversified financial service company. To do this Randall wants to acquire Corporate Transfer Services (CTS) a small relocation services company, as part of a plan for diversification. Informal discussions took place with the principal stockholders of CTS four months ago. Currently, formal negotiation strategy plans are in the works and a purchase offer is in the development stage. If successful, the acquisition of CTS will be a first for CMI and will help Randall realize his goals for CMI diversification.
Analysis
CMI’s main interest is to expand their financial services and build a strong company that can hold their own against industry leader, Merrill Lynch. CMI must acquire CTS at a reasonable price to achieve this goal. They also need to retain key employees to manage CTS’s current business interests, and to foster a good relationship with CTS founder, Elliot Burr. This will allow them to make an entry into his MetroNet “old boy” network. Benefits for CMI include - a huge jump start into the corporate relocation business, immediate licensing and other legal documentation in 38 states, influential entry into the MetroNet network which would lower operation of CTS, an experienced operations manager in Tom Winder, and finally a significant increase in CMI’s mortgage insurance business
Questions
1. Prepare, and be ready to discuss, a negotiation strategy for Randall and Dolan.
The case suggests that the relationship with Elliot Burr is important to CMI, so it is important that an acceptable price can be agreed upon that will satisfy both CMI’s parent corporation NEC, and the four partners of CTS. A collaborative strategy would be the best move for CMI, because even if they are not able to come
Background
Capital Mortgage Insurance Corporation (CMI) is a wholly owned subsidiary of Northwest Equipment Corporation (NEC). NEC expects Frank Randall, company president; to build CMI into a larger more diversified financial service company. To do this Randall wants to acquire Corporate Transfer Services (CTS) a small relocation services company, as part of a plan for diversification. Informal discussions took place with the principal stockholders of CTS four months ago. Currently, formal negotiation strategy plans are in the works and a purchase offer is in the development stage. If successful, the acquisition of CTS will be a first for CMI and will help Randall realize his goals for CMI diversification.
Analysis
CMI’s main interest is to expand their financial services and build a strong company that can hold their own against industry leader, Merrill Lynch. CMI must acquire CTS at a reasonable price to achieve this goal. They also need to retain key employees to manage CTS’s current business interests, and to foster a good relationship with CTS founder, Elliot Burr. This will allow them to make an entry into his MetroNet “old boy” network. Benefits for CMI include - a huge jump start into the corporate relocation business, immediate licensing and other legal documentation in 38 states, influential entry into the MetroNet network which would lower operation of CTS, an experienced operations manager in Tom Winder, and finally a significant increase in CMI’s mortgage insurance business
Questions
1. Prepare, and be ready to discuss, a negotiation strategy for Randall and Dolan.
The case suggests that the relationship with Elliot Burr is important to CMI, so it is important that an acceptable price can be agreed upon that will satisfy both CMI’s parent corporation NEC, and the four partners of CTS. A collaborative strategy would be the best move for CMI, because even if they are not able to come