Flinder Valves and Controls Inc

18 Pages Posted: 14 Jun 2009

See all articles by Michael J. Schill

Michael J. Schill

University of Virginia - Darden School of Business

Abstract

Set in May 2008, this case reflects the separate perspectives of chief executive officers Tom Eliot and Bill Flinder as they approach the negotiations of RSE International Corporation to acquire Flinder Valves and Controls Inc. The task for the student is to complete a valuation analysis of the target and buyer and to negotiate a price and exchange ratio with the counterparty. The intent of the case design is for students to be organized into teams and assigned to play the part of either Flinder Valves or RSE International in the negotiation. The case provides supplementary private information for each side of the transaction. Therefore, a unique element of the case is negotiating the terms of acquisition in an environment of asymmetric information. The case is relatively simple and provides a first exercise in the negotiation of an acquisition. It could also be taught in the usual case-discussion fashion instead of the intended joint-negotiation exercise.

Excerpt

UVA-F-1573

Nov. 17, 2008

FLINDER VALVES AND CONTROLS INC.

In early May 2008, W. B. “Bill” Flinder, president of Flinder Valves and Controls Inc. (FVC), and Tom Eliot, chairman and chief executive officer of RSE International Corporation (RSE), were planning to negotiate a possible acquisition of FVC by RSE. Serious discussions for combining the two companies had started in March of that year, following casual conversations that dated back to late 2007. Those initial talks focused on the broad motives for each side to do a deal, and on the management issues, including compensation, in the new firm. What still remained was to negotiate a final term sheet on which the definitive agreement would be drafted and signed.

In the background, the past 12 months had been associated with mounting difficulty for the U.S. economy. The industries within which RSE and FVC operated were not immune from these effects. A recent analyst report summarized the market view for industrial manufacturing.

Tighter borrowing standards and a severely weakened housing sector are weighing on the domestic economy, prompting consumers to cut back on spending and industrial manufacturers to reduce production. A similar situation now seems to be taking hold in western Europe.

. . .

Keywords: merger valuation, negotiation exercise

Suggested Citation

Schill, Michael J., Flinder Valves and Controls Inc. Darden Case No. UVA-F-1573, Available at SSRN: https://ssrn.com/abstract=1418913 or http://dx.doi.org/10.2139/ssrn.1418913

Michael J. Schill (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

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