SABANCI UNIVERSITY
FACULTY OF MANAGEMENT
FIN524
Mergers and Acquisitions
CASE #1:
Flinder Valves and Controls Inc
Submitted to:
Ast.Prof. Dr. Serif Aziz Simsir
Prepared by
Polat Sen
Chaimae Mabrouk
Strengths and Weaknesses of FVC and RSE
FVC has a good top-management team, skilled workers, and had a reputation for engineering excellence. This strong reputation allowed the company to do prime contract work on high engineering devices for the government. FVC has acquired the patents it needs in developing its products. Its management team believes that a continuous introduction and development of new products with patent protection is a key to success. The company is currently working on the widening-gyre project that could have a broad application in nautical, aerospace, and automotive products, and is expected to generate considerable economic benefits if successful. Moreover, the company is financially stable, and its sales have witnessed a two digits growth rate during the last two years (i.e: 2006 and 2007). On the other hand, FVC’s weaknesses include a low access to capital; i.e not enough funds to support the cost of expending and bankrolling more research.
RSE has a high access to capital. As stated in the case it is “a deep pocketed” potential partner. The company follows a policy of focused diversification. As a result, RSE has gained considerable know-how and experience in the industrial machinery sector. The firm was considered a low-cost producer that possessed unusual production knowledge. Furthermore the firm has been implementing the project CORE to improve its profitability, and by 2008, the project has already been considered successful. Likewise, RSE has a large marketing and distribution network, and know-how for high-volume manufacturing. However, the company’s earnings growth rate is quite low and needs to be boosted.
These companies want to negotiate because each one of them sees...