negotiations insurance case - Case 1 Capital Mortgage...

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Case 1: Capital Mortgage Insurance Corporation Background Capital Mortgage Insurance Corporation (CMI) is a wholly owned subsidiary of Northwest Equipment Corporation (NEC). NEC expects Frank Randall, company president; to build CMI into a larger more diversified financial service company. To do this Randall wants to acquire Corporate Transfer Services (CTS) a small relocation services company, as part of a plan for diversification. Informal discussions took place with the principal stockholders of CTS four months ago. Currently, formal negotiation strategy plans are in the works and a purchase offer is in the development stage. If successful, the acquisition of CTS will be a first for CMI and will help Randall realize his goals for CMI diversification. Analysis CMI’s main interest is to expand their financial services and build a strong company that can hold their own against industry leader, Merrill Lynch. CMI must acquire CTS at a reasonable price to achieve this goal. They also need to retain key employees to manage CTS’s current business interests, and to foster a good relationship with CTS founder, Elliot Burr. This will allow them to make an entry into his MetroNet “old boy” network. Benefits for CMI include - a huge jump start into the corporate relocation business, immediate licensing and other legal documentation in 38 states, influential entry into the MetroNet network which would lower operation of CTS, an experienced operations manager in Tom Winder, and finally a significant increase in CMI’s mortgage insurance business Questions 1. Prepare, and be ready to discuss, a negotiation strategy for Randall and Dolan. The case suggests that the relationship with Elliot Burr is important to CMI, so it is important that an acceptable price can be agreed upon that will satisfy both CMI’s parent corporation NEC, and the four partners of CTS. A collaborative strategy would be the best move for CMI, because even if they are not able to come to an agreement, CMI can still maintain a good relationship with Elliott Burr for future ventures. At the negotiation table CMI could present research completed on CTS’s operations to gain advantage. CMI followed correct negotiation process by first getting into a good position. It was obvious that CTS was eager to sell. CMI employed strategic moves by doing background research to determining the value CTS would be to CMI in acquisition. CMI also collaborated with MetroNet for support, who was already involved with CTS 2. What should CMI be expecting from CTS? CTS believes they are worth $6.25 million plus for only 80% stake. This calculation is higher than CTS net worth because some of the CTS executives have invested more money in the company and are interested in recouping some of their investment. CTS partners need assurance that they will receive some of their investment back and details assuring this plan could be negotiated. Negotiation Logistics
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This note was uploaded on 12/18/2011 for the course HR HR595 taught by Professor Tammiclearfield during the Spring '09 term at Keller Graduate School of Management.

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negotiations insurance case - Case 1 Capital Mortgage...

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