S&B's local competitor, Berkley Stone Partners (BSP) is a spinout company which initially formed part of S&B
Question:
S&B's local competitor, Berkley Stone Partners (BSP) is a spinout company which initially formed part of S&B before its management took independent control through a management buyout. The private equity company that financed the buyout have since made an exit, but BSP's profitability has steadily dropped, and its reputation has faltered. BSP through poor management practices and bear-market conditions has run into a significant amount of toxic debt and may not have the capacity to recover on its own. Toxic debt in this sense relates to loans which are at risk of not being paid back, and are made against an asset which wouldn't make much money if sold. BSP has shown significant interest in re-joining S&B, hoping to avoid large layoffs and potential bankruptcy. On one hand this would seem like a mutually beneficial arrangement; BSP was previously part of S&B and shares a similar organisational culture and values, increasing the likeliness of a successful merger. Similarly, due to BSP's financial difficulties, the firm could be purchased relatively cheaply, gaining access to other areas in the north east which are not currently S&B territories. However S&B would become ultimately responsible for BSP's falling profits, requiring significant work and investment to transform the company to a more functional, effective arm of the organisation. It is also possible that should transforming the company fail, and the firm continue to function poorly, BSP's toxic debt could drag down profits at S&B, putting S&B in a precarious position.
Identify the factors which could influence both success and failure in this merger, and as a group decide if the merger should go ahead.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr