Corp Finance

Case 1

Molly McClellan’s Foods.

(Financial Statement Analysis)

The Miller Walton Group. Alex Miller and Robert Walton head the Miller Walton Group, which is a group of investors that make acquisitions of small firms throughout the Midwest. Headquartered in Des Moines, Iowa the group is interested in small manufacturers of packaged goods or foodstuffs. The group controls over $20 million that can be used for the acquisition of these small businesses. The major criterion for the acquisition of by the Miller Walton group is that the firm being acquired shows a history of adequate profitability. The group feels that with their management expertise they can increase the profitability of the firm giving them a high return on their investment. Depending on how the firm fits with the previous acquisitions, the firm may become a permanent member of the group or sold off to other investors at a much higher price.

Potential Candidates for Acquisition

The following candidates have been identified as potential targets for acquisition by the firm:

Sinclair Soy Products in Manchester, IL

Molly McClellan’s Foods in Altoona, IA.

Ralfkin Cleaning Products in Owatana, MN.

Either the owners have contacted Miller Walton about selling or others sources have indicated that the current owners may be interested in selling the businesses.

Eric Miller and Ashley Johnson have been assigned to analyze Molly McCellan’s Foods for the group and make a recommendation on whether the purchase should be made and a reasonable purchase price. Johnson is to focus on the marketing strategy of the firm while Miller is to do the financial analysis.

Molly McClellan’s Foods

John McClellan and his wife Molly, the sole stockholders in the small corporation, are both looking forward to retirement and have contacted the Miller Walton Group about selling the company. Molly McClellan’s Foods began in 1972 with only two products; tomato soup based salad...