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Loewen Case Study (Memo Format)

In: Business and Management

Submitted By geekonomist
Words 686
Pages 3
Mr. Loewen –
After some careful consideration and examination, I recommend that we accept SCI’s bid of $43 per share. My recommendation is based upon my assessment of four things: * Our position after the Mississippi case settlement * Our financial situation * Our business model * SWOT and Industry Analysis
First, the Mississippi case has somewhat damaged our company’s image and may portray us as a company that does not honor legal agreements. Not only was a contract broken that brought the case originally, but so was the settlement as a number of the “subject to” provisions were not met. If this be the case, then it could stand to reason that we may be viewed as untrustworthy in other agreements. Being that acquisitions are based more so on the intangibles and our reputation as “the preferred acquirer” is key to our ability to attract high quality acquisitions this sullying of our image may hamper our efforts at quality growth.
This case has also put us in a precarious financial situation. The settlement has necessitated that we undertake a refinancing of the company to cover the cash portion of the agreement. While we were able to ease investor nerves and regain some share price, after losing more than 50% of share value, that confidence is tentative and dependent upon us maintaining our acquisition pace and operational profitability. This will be a hard feat as our acquisitions costs growth rate has averaged 80% over the last three years and to continue this will require us to issue debt and find creative ways to finance those acquisitions. This will be complicated by the fact that our Current Ratio has dipped below 1 for the first time which is an indicator for the risk of bankruptcy and make it more costly to borrow or close the option to raise cash from debt. Our Debt Ratio has crept closer to 1 than it ever has which could also...

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