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Gainesboro Machine Tool Company
A Case Study By: Wayne Parker 3/17/2009
Introduction
Gainesboro Machine Tool Company (Gainesboro) is an enterprise in transition. Ashley Swenson is the Chief Financial Officer (CFO) of Gainesboro, who has to make a difficult recommendation to a divided board about the company’s shareholder distribution strategy as the company begins to emerge from that transition. The following analysis will provide a brief history of the company, a discussion of the underlying concepts related to Ms. Swenson’s decision, an examination of the company’s strategic and financial position and forward looking options, and finally a suggested recommendation for Ms. Swenson to present to the board of directors.
Company History Established in 1923, Gainesboro has evolved from the entrepreneurial effort of two engineering schoolmates dissatisfied with their job prospects to leading enterprise in the industrial machinery design and manufacturing industry. Having started out designing and manufacturing machinery parts such as dies, molds, and metal presses the company was well positioned to take advantage of the war effort in the 1940’s. Their manufacturing facility was quickly adapted to produce parts for tanks and other armored vehicles as well as the production of other miscellaneous equipment used in the war effort. After the war the company focused on industrial presses and molds and by the mid 1970’s had developed the reputation as an industry leader in a business that was dominated by small, local players. During the 1980’s the design and manufacture of industrial equipment and machinery was being impacted by the young but burgeoning information technology industry. Gainesboro was at the forefront of this evolution and quickly developed cutting edge computer-aided design and computer-aided manufacturing (CAD/CAM). Gainesboro continued to be an industry leader until the late 1990’s when the company fell behind the lightning fast
A Case Study By: Wayne Parker 3/17/2009
Introduction
Gainesboro Machine Tool Company (Gainesboro) is an enterprise in transition. Ashley Swenson is the Chief Financial Officer (CFO) of Gainesboro, who has to make a difficult recommendation to a divided board about the company’s shareholder distribution strategy as the company begins to emerge from that transition. The following analysis will provide a brief history of the company, a discussion of the underlying concepts related to Ms. Swenson’s decision, an examination of the company’s strategic and financial position and forward looking options, and finally a suggested recommendation for Ms. Swenson to present to the board of directors.
Company History Established in 1923, Gainesboro has evolved from the entrepreneurial effort of two engineering schoolmates dissatisfied with their job prospects to leading enterprise in the industrial machinery design and manufacturing industry. Having started out designing and manufacturing machinery parts such as dies, molds, and metal presses the company was well positioned to take advantage of the war effort in the 1940’s. Their manufacturing facility was quickly adapted to produce parts for tanks and other armored vehicles as well as the production of other miscellaneous equipment used in the war effort. After the war the company focused on industrial presses and molds and by the mid 1970’s had developed the reputation as an industry leader in a business that was dominated by small, local players. During the 1980’s the design and manufacture of industrial equipment and machinery was being impacted by the young but burgeoning information technology industry. Gainesboro was at the forefront of this evolution and quickly developed cutting edge computer-aided design and computer-aided manufacturing (CAD/CAM). Gainesboro continued to be an industry leader until the late 1990’s when the company fell behind the lightning fast