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negotiations capital mortage insurance

negotiations capital mortage insurance - Negotiations 246...

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Negotiations 246 Capital Mortgage Insurance Group Position Paper 1 Arin Halicki Amit Shah Helen Kim Satish Ramachandran 10/31/08
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Overview Capital Mortgage Insurance Corporation (CMI) sells insurance to lenders protecting against mortgage default losses. They are a wholly owned subsidiary of Northwest Equipment Corporation. Following their acquisition in 1978, CMI’s goal has been to rebuild their business and diversify their services. The Senior VP and Treasurer at CMI, Jim Dolan, discovered that corporate employee transfers will be a source of stable business and profitability for a long time to come (Lewicki 577). Merrill Lynch (ML) holds the lion’s share of the relocation services market. In alignment with their vision of growth and diversification, CMI sees value in entering the relocation services market. Entry could round out their overall service offering and allow them to better compete with ML. Thus the CMI vision to create a “residential real estate financial services company” (Lewicki 576) was born. Frank Randall, the President of CMI started looking for potential acquisitions. He contacted, David Osgood, executive director of the Metropolitan Realty Network. MetroNet facilitated referrals of relocated homebuyers with brokers in the new locations. They also believed that employee relocation services would be a source of stable income once a broker establishment was achieved. The company’s current relationship with a Chicago-based relocation and third party equity firm Corporate Transfer Services (CTS) had not paid off to date. After sharing the CMI vision with Osgood, it became apparent that shared interests between CMI and MetroNet aligned. A potential deal could come about through CMI’s acquisition of CTS while leveraging a relationship with MetroNet. CMI’s proposition was made to and accepted by the MetroNet Third Party Equity Committee on March 1st. With the committee’s approval, Randall and Dolan began a series of negotiations with CTS in March and April. CMI sees a lot of value in the alliance with well-connected Eliott Burr, a CTS executive, and his team. CTS is also eager to be acquired, but is concerned about their ownership stake post- acquisition. Despite candid communications between the teams about CTS operations, CMI is hesitant about the value of the acquisition offer and how it will affect the relationships between all players including MetroNet. The teams will meet on May 24 th to review and negotiate CMI’s proposed offer of acquisition.
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