group - 2 final

8/8/2019 Group - 2 Final

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Presented by: NITYA SINGH BM-09130

PARTH SINGH BM-09138

PANKAJ VERMA BM-09136PRATIK DHIR BM-09147

PRAVEEN KUMAR GIRI BM-09149

PUSHKAR RASTOGI BM-09156

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Newschem Corp- A relatively small company in the

chemical industry.

Originally start up division of FORTUNE 500 oil company

It pursued a strategy of acquisition of companies,

downstream in the process.

The company went for three manufacturing firms acquisition

between 1985-1990 for $4 to $6 million in annual revenues.

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New Chem sought firms with growth potential, in which

infusion of cash could fuel growth.

The company has also decided to acquire BADGERManufacturings two divisions Cleantech and Plastics

Jack Davis, one of its chief operating officer usually

oversee operations, was made responsible for the wholeprocess by Phil Connors(New Chems President)

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Badger manufacturing has 2 divisions- cleantech and

plastics.

Badger Cleantech manufactured liner systems of sanitary

environmental landfills. The liners ,legisleted by the government, prevented

pollution from waste disposal from leaking into the

groundwater.

The main problem was with the badger plastic division. The division had been losing money in the years from

1988 -1990.


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Badger plastics custom - produced moulding plasticpieces.

It was used in Medical, Aerospace & defence industries.

This industry was highly fragmented, very competitive

and possessed low barriers to entry.

The plant was operating at full capacity and had a modest

backlog of orders.

The financial results were good and the division was run

by a bright, but aggressive Stanford MBA.


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Whether synergy is there or not.in the entire

acquisition process????

Is it ..2+2=4 or 2+2=5

Pricing and Valuation..

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The r blem i i iti w with B er

l ti .

The ivi i w r i i t l es.

B er l sti shad disti t mpetitiveadvantage.

Newschemhasnoexperience in this industr .

Fearandde-motivation in the workforce.

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Loss of $ 6,30,000 equivalent to -ve 6% of sales, in

1990.Even worse this performance was best in recent

years.

Losses were as a result of not reaching sales target of$12 million.

Management has over estimated the production

capacity & underestimated the cost to show that they

were meeting there production goals.


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The burden lies on Davis, Chief operating officer at

Newchem, to make the loss turning company into a

profitable business which he had successfully done by

identifying the problems & providing solutions tothem.


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` Co. was not able to reach the sales target of $12

million which was set by the department.

` It had 120 employees, who were told division was indanger of shutdown.

` Their productivity declined

` Overhead cost increased

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` Davis has been assigned to complete the due diligence

investigations and turn Badger around in a years time.

` He is working against time and does not like the

acquisition of a loss making company.` He argued many a times against this acquisition.

` But Newschem finalized the deal depending on the

results of the Due Diligence process in spite of Daviss

opposition .


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Its like core investigationswhich comes under

forensic department

The due diligence clause in the purchase and sale

agreement provided some boundaries It shows how much freedom the current owners might

allow Davis in seeking information about badger

Plastics

Allows the potential purchaser the rights to inspect thefinancial records, property, equipment.

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To verify sales by matching goods shipped & invoicessent with money received.

It permitted the seller to continue to run the business

without undue interference

The nearer the sale date the more access the party

would be allowed

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THANK YOU

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group - 2 final

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