Raptor Inc.

Ralph Nadir, CEO of Raptor Inc. was considering several acquisition candidates for his company’s diversification program. One of the companies, Regal Inc. had been approached three years earlier but had refused to discuss a possible deal. Now Regal was in the middle of a hostile takeover battle with the Southfork Company that might provide Raptor with a chance to gain control.

Raptor Inc.

Raptor was a leading manufacturer of engines and compressors used to force natural gas through pipelines and oil out of wells. Management was concerned over its heavy dependence on sales to the oil and gas industries and fluctuations in earnings caused by the cyclical nature of heavy machinery and equipment sales. Although the company’s long term sales and earnings growth have been well above average, management believed its cyclical nature had significantly dampened Wall Street’s interest in the company’s stock.

Initial efforts to reduce the volatility had not been successful. Raptor had acquired a power tool company, a compressor manufacturer and a producer of tools for the automotive industry. While the acquisitions did broaden its markets, Raptor was still sensitive to general economic conditions.

After several months of study, three criteria were established for all acquisition. First, the industry should be one in which Raptor could become a player. Second, the industry should be fairly stable, with a broad market for their products and a product line of “small ticket” items. This product definition was intended to eliminate any company that had undue dependence on a single customer or several large orders per year. Finally, it was decided to acquire only leading companies in their respective market segments.

This new strategy was initially implemented with the acquisition of Mystic Rule Company, the world’s largest manufacturer of