Kudler Fine Foods Paper

Kudler Fine Foods: Comparison and Contrast

Team C

FIN 370: Finance for Business

Gerald Maurer

January 18, 2010

Kudler Fine Foods: Comparison and Contrast

In this final paper Team C will discuss the viable options for Kudler Fine Foods and their expansion operations. The options that will be discussed are; going public through an IPO, acquiring another company in the same industry, and a merger with another organization.

We then will show the strengths and weaknesses to each approach, the opportunities of each approach, the threats of each approach and the financial implications. In conclusion we will discuss our recommendation.

IPO, Acquisition, or Merger: Why Each Would Work

There are three viable options for Kudler Fine Foods as it decides how to expand its operations. It can go public and offer shares through an initial public offering (IPO), it can acquire another company in the same industry, or it can merge with another organization.

Why an IPO would work.

Kathy Kudler’s overall plan is to operate the business for another 10 to 15 years and then retire (University of Phoenix, 2008). The advantages of going public are that an IPO would raise new capital for Kudler Fine Foods, Kathy Kudler would gain liquidity of her share holdings, the company would gain future access to the public capital market, and Kudler Fine Foods would enjoy the benefits of the higher profile afforded by being publicly traded (Keown, Martin, Petty & Scott, 2005).

Why a merger or acquisition would work.

Merger and acquisition have the potential to create synergies, the anticipated benefits from merging (Keown, Martin, Petty & Scott, 2005). Merger and acquisition can create economies of scale, cutting the relative cost of administrative expended or giving the firm increased market power through its greater size (Keown et al). There are tax benefits to be had as well, plus unused debt potential, and a reduction in bankruptcy costs (Keown et al)....