Capital Mortgage Insurance

1. I think Capital Mortgage Insurance Corporation (CMI) has done a great job on researching the company and understanding the leadership team and possible motives behind wanting to sell. I do think, however, that CMI could do a better job of being confident in their offer or at least have a better understanding of expected reactions. Going into the negotiation, CMI is unsure which tactic they will use or what their stance will be. They are also unsure of CTS’s reaction and even starts to question the low offer based on the fact that it has taken a while to get an offer to CTS.

2. I think Corporate Transfer Services (CTS) will have a knee jerk reaction of being offended but will counter the offer with a number closer to their original asking price of 5MM. I don’t think, however, that CTS has been or will be able to justify an asking price that high. Additionally, I think CTS will have some reservations about selling 100% of the company since they were originally interested in remaining involved in a smaller equity capacity.

3. They were disappointed in the opening offer. As expected they replied they wanted 5MM but didn’t officially counter with a number. To me it seems as if it was just a reaffirmation of the original asking price. I think by Randall asking “What did you have in mind” it unnecessarily opened the door for CTS to respond as they did, with the original asking price.

4. I think CMI should ask if CTS is open to entertaining any offers under their ask price of 5MM and further explain how CMI has reached their valuation. I think they need to wait for CTS to come down on their offer before making any kind of adjustments to their original offer of $400,000. I think CMI should also ask CTS to explain how they are coming up with a 5MM valuation with no projectable revenue stream.

5. CMI questions if CTS is serious about their offer of 5MM and if so, there is no real reason to continue on the discussions. CMI then learned that...