Case 39 Yeats Valves and Controls Inc
The Firm and its Environment Yeats Valves and Controls Inc, headquartered at Innisfree, California, was principally engaged in the manufacture of specialty valves and heat exchangers. ... Bill Yeats, chairman, CEO and founder of Yeats Valves and Controls Inc. ... He had to meet with Edna Millay, an investment banker and member of Yeats Valves’ board of directors, to discuss the possible acquisition of Yeats Valves by TSE International Corporation. As the company that is to be potentially acquired, it is Yeats’ job to find what he thinks is his company’s value or price that he thinks is acceptable and also captures the intrinsic characteristics of the firm such as its intellectual capital and the unforeseen benefits of its new “widening gyre” R&D program. Along with the target price, Yeats must find the lowest possible price that the company should set for negotiations. Yeats, who is nearing retirement age, has yet more reasons to push the acquisition deal through with TSE International Corporation. Yeats desired acquirer, TSE International, is a large company that would be able to support and continue the company’s research and development projects. Furthermore, Yeats would be able to gain marketing, distribution channels and production know-how from TSE. Finally, Yeats would gain an incentive bonus from TSE, which would add to his retirement benefits. ... Why should Yeats Valves and TSE Company want to negotiate? ... What are the high and low likely values of Yeats Valves? ... Prepare a recommendation for the price and exchange ratio for a combination of Yeats Valves. What steps should Bill Yeats take? ... The major remaining problem is to determine a basis on which shares of Yeats Valves’ common stock will be exchanged for those of TSE International. Yeats must be able to convince TSE that his company is worth much more than even his conservative forecasts show, and he must be cautious of his eagerness to complete the deal.