Nantucket Nectars

I. Background

Tom Scott and Tom First started Nantucket Nectars, a business selling fresh juice in the Nantucket Harbor after their graduation. Initially, they started it with a capital of $17,000 and hired a contractor. The next few years they operated in an undercapitalized state which led them to sell 50% of the company to Mike Egan. During the run, they had several questions that they would like to be answered regarding the financial health of their company.

II. Problems

Tom Scott and Tom First wanted to grow the company but were worried about the associated risks. Given their growth needs, they needed to decide whether to sell a part of or all of the company, operate under status quo, or undergo an IPO. Aside from wondering if they needed to hire advisors, the following problems were considered for the three options:

1. Sell a part or all of the company

- How will they handle the negotiations in order to maximize the price?

- How will they hold the meetings so their employees would not find out prematurely about the transaction and what will happen to their current employees if they do sell the company?

- If the ownership structure of the company helped or hindered the negotiation process. As their only investor then, Mike Egan, aggregated 55% of the company.

- How should they handle the auction process?

- How will their existing distributors be affected if they do decide to sell?

- There is a possible shelving of their product in favor of the acquirer’s existing product.

2. Operate under status quo

- What is the effect to their company image if they decided not to sell?

- They are currently unable to institutionalize future contracts on ingredients. This is a major problem for them as they use more juice concentrate than other brands.

- Their management is unstable, lacks organizational skills and financial management.

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