Minter

Problem

James Wiley, president of the Minter –Hale received the offer the acquisition of business from Mr. Clay, president of Automotive Products Corporation (APC).

Alternatives

1. Buy APC and run the business at Detroit.

2. Buy only equipment of APC and use it at Minter-Hale’s factory

3. No buy APC

Criteria

1. Financials

2. Profitability

3. Union

4. Diversification of the Minter Hale’s business

Analyses

In terms of above criteria, the Alternative3(No buy APC) is the best for Minter-Hale. The analyses are below. Exhibits include all calculations that I will refer.

First of all, Alternative2 is irrelevant. Minter-Hale would have to transfer the equipment from Detroit to its factory. It cost much. In addition, even though Minter-Hale’s all facilities were operating at capacity, the demand would decrease in near future because big car manufacturers would start to make hardware by themselves. Minter-Hale doesn’t need to increase their capacity at that time.

Next, Alternative1 is also irrelevant. Purchasing the APC is good not business. Following analyses will support the relevancy of Alternative3.

Financials

Minter-Hale’s financial situation was very well. Its Account Receivable Turnover is 41 days. On the other hand, Its Account Payable Turnover is 70 days(see Exhibit1). In terms of working capital, the company needed $1.2million to run its business. According to its balance sheet, it had enough cash, and it also had the cash like asset, Treasury bonds. At the time of December 1954, they could use $2.8million (=$4million-$1.2million) for investment.

Minter-Hale would have to use $1.5million out of $2.8million in 1956 for business diversification. In addition, they would need another $1.5million in 1957. Based on the assumption that Minter-Hale would make almost same amount of net profit as 1954, the company would make more than $1million cash. It would be enough for $3million investment for new...