13 Pages Posted: 2 Jun 2017
This case and its companion, "LoMar Adhesives" (UVA-QA-0774), are intended for MBA, executive education, and MBA executive audiences. They were written for a "Bargaining and Negotiating" elective. This case is from the perspective of Clare Clemons, vice president of Business Development and Acquisitions for Marietta Industries (a large multinational corporation), who is working on the potential acquisition of LoMar Adhesives, a small, closely held business.
Rev. Jan. 13, 2012
As Clare Clemons, vice president of Business Development and Acquisitions for Marietta Industries, finished her latest revision of the white paper on the potential acquisition of LoMar Adhesives, she was thinking that although it was only March 2004, this acquisition might end up being the most important one of the year. Several deals this year had already fallen apart during due diligence and there were not many exciting opportunities on the horizon. Clemons and her team had the primary responsibility of identifying acquisition targets and negotiating deals for Marietta. Investment analysts had estimated that about a third of Marietta's market cap premium over its peers was due to Marietta's ability to acquire, integrate, and deliver productivity synergies from its new additions. More than half of Marietta's growth over the previous 15 years had come from acquisitions, both large and small.
The initial contact with LoMar Adhesives, made by a member of Clemons's group, had received a lukewarm reaction. Nonetheless, it was agreed that a Marietta team could make site visits and that financial records would be exchanged. As a result of those preliminary investigations, LoMar became a particularly interesting target due to its similarities to two previously successful acquisitions and the potential for very profitable synergies with several Marietta businesses. Clemons arranged the first formal meeting with Stephen Rucker, president and CEO of LoMar, to take place the following week. Given that a large part of her annual bonus was based on closing acquisitions successfully, Clemons felt some pressure to close a deal. But Clemons realized that Marietta's CEO would only approve a deal that met Marietta's strict acquisition criteria: (1) strategic fit with existing corporate competencies/companies and (2) long-term accretion by providing at least a 16% average return (before interest and taxes) on investment over the first three full years of operation.
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Keywords: M&A, merger acquisition, negotiation
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