Formica Corporation A-B

Babson Professor Joel Shulman, Case Director

Peter Langone and Andrea Alyse, Case Writers

Arthur M. Blank Center for Entrepreneurship

© Babson College, 1998.

Abstract

Two executives contend with persistent and severe financial problems, sometimes due to success, sometimes due to duress. During the early years of the case, the company has a positive bottom line that attracts suitors and threatens the independence of the company. Proposed solutions include employee buyouts, auctioning the company off, or accepting a hostile takeover.

The second part of the case shows how the company has fared after the executives decided to prevent the hostile takeover with a leveraged buy-out. The resulting debt burden has made the company non-competitive and the unions refuse to consider productivity improvements while the faltering economy is preventing revenue growth. With a bottom line that has gone negative, the owners must act quickly to salvage the company.

Location of the company: New Jersey

Years spanned by the case: 1988 - 1994

Industry segment: Manufacturing

Stage of the company: Mature

Age of the entrepreneur: Not Applicable

Key Words: Manufacturing, buy-out, auction, debt, leveraged, IPO

DVD

A 28-minute DVD is available for this case. One of the principals from the case answers questions in a Babson class. Please place video orders through the Arthur M. Blank Center for Entrepreneurship.

Teaching Notes

A case teaching package, written by Joel Shulman, is available for this case. The teaching package includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into a course.