a) What does Commercial Fixtures do? What is their competitive position in the market place?
CFI manufactures custom-engineered fluorescent lighting fixtures used for commercial and institutional applications Strive on designing products that are specific to the customer’s/lighting Goals in the company are to find the right product for the customer’s particular needs and build a relationship with the customers Their prices aren’t as sensitive as other commonplace lighting fixtures.
b) As a third party under the same conditions (i.e. with the same information), what would you bid for the entire company (both halves)? Why?
c) What do you expect Albert Evans to bid for Gordon’s half interest? Why?
d) What should Gordon Whitlock bid for Albert’s half interest? Why
Notes on Case:
Whitlocks are more team oriented…Allens are more controlling and like to do things their own way Gordon Whitlock; CFI President
1975 Joined CFI as a salesperson
1979 learned about other parts of company…first work assignments in manufacturing and sales service Became sales manager
1982 became company president
Personality Aggressive, likes to do things his own way, hard to get along with 1976 joined CFI as a salesperson
1980 joined father in manufacturing area
Became manufacturing manager
Jonathan Whitlock & Julius Lacy formed CFI in 1955. Whitlock did finance while Lacy did sales and design. Subcontracted all manufacturing for systems they sold
JONATHAN WHITLOCK BOUGHT OUT LACY DUE TO “DIFFERENCES IN PERSONAL WORK HABITS” Brought in Paul Evans (was sheet metal subcontractor at the time) Whitlock was treasurer & Evans was President Whitlock retained a few shares more than half (because of experience with Lacy) Whitlock had heart attack in 1978 and withdrew from management Paul’s chief aside could not work with three younger managers…so he had to leave. Paul became so angry that he rarely entered the plant again CURRENT TIME
Date: February 23, 1998
Determining whether Whitlock or Evans will buy out the other and own CFI (company built by their fathers) They have differences of opinion…best way to solve problem Manufacturing facility outside of Denver, CO
135,000 square foot plant
104 workers (34 sales, engineering, admin & 70 in production/assembly) electrical components purchased from outside suppliers
Sells nationwide through regional distributors to contractors/architects for new buildings/renovations Bids for orders compared to bids from half a dozen other firms in country Higher % of orders for premium-priced products
Custom-engineered fluorescent lighting fixtures
Type of Items Sold
15% modified version of standard
Commercial Fixtures Inc.
1959: CFI began manufacturing and moved operations to multi-floor 50,000 square foot plant in Golden 1981: company’s ownership restructured (reflecting changes in management) Fathers converted ownership to nonvoting Class A stock
Each father transferred 44% of nonvoting stock to their sons Jonathan Whitlock decided to relinquish voting control in an effort to help things work as new generation took over Gordon & Albert each issued 50% of Class B voting shares
1981: Gordon Whitlock began to work with individual to form a company in the computer field that rented extra space from CFI Gordon split partial ownership in new company with Albert (even though Albert wasn’t involved in this company) Did this because they were partners & Gordon was spending time away from CFI with the new company Computer company sold in 1981…financial manager joined it as treasurer and resigned from CFI 1981: Due to heavy demands of the start-up over next three years, Albert and Gordon’s relationship weakened Albert and financial manager began to have strong disagreements as well Disagreements between Albert and financial manager
Forays in cost analysis
Differences of opinion over relations with work force and consistency of policy 1982: Gordon Whitlock became presidentwhy did he resign? Gordon upset because they lost an excellent financial manager (in his opinion due to disagreements with Albert) 1989: moved to manufacturing facility outside Denver, CO
Eased stresses between partners
Corporation purchased indirect competitor to obtain product lines and sold CFI this facility CFI entered agreement to manufacture some of other company’s light fixtures as a subcontractor Poor condition of plant…Albert took over project of renovating and continuing production of other company’s lines Gordon remained in Golden running CFI operation alone
1991: hired plant manager to run Denver plant and Albert came back to Golden A lot had changed in Golden since then (2 years later)including management style which differed from Albert’s Albert wasn’t as involved…developed a lot of outside interests Gordon liked this because it lessened conflict. But when Albert came back, disagreements were worse 1992: sold Golden plant and put whole company in Denver
Gordon spent time with sales manager trying to change company from regional to national Albert spent time in engineering, design, and manufacturing areas Purchased plant for good price…with new equipment and deleted marginal product lines as they expanded nationally 1992?: Company was expanding…and so was the team (6 ppl)
Evans worked on applications engineering for custom fixtures and new product design, sales manager, financial manager, engineering manager, plant manufacturing manager, and Gordon Disagreements began.
Albert got to the point where he didn’t like much of anything going on in the company…he became more and more isolated Everyone disagreed with him
1990: Gordon began to believe Albert and him have grown too far apart to continue together. Albert didn’t want to arrange one to buyout the other 1996: Paul Evans died. He had remained chairman of the board, but had been generally inactive since 1980 Jonathan & Gordon Whitlock and Albert Evans were the only directors 1996: Different leadership styles were disruptive and made employees feel uncomfortable 1997: Executive committee’s annual planning meeting in January…loud arguments and violent disagreements. Everyone was miserable. In August, Gordon came back from vacation and was greeted by numerous complaints (managers and sales agents) September 1997: Peter Dowling, attorney gave both men idea of each partner naming a price for the business…BOTH AGREED…(although Albert was hesitant) Why was Albert hesitant?
Only work experience was with CFI
Limited to manufacturing operations
Didn’t know how to value a company (little training in financial analysis) Emotional tie to company
December 1997: Albert wanted to fire financial manager and become treasurer of company Wanted to look at figures for a year or so and make a better decision Gordon thought this was a way to buy time
February 17, 1998: both signed a mutual buyout agreement
Sealed bids in a specific format with the partner offering the higher price buying out the other Bids to be submitted in one week
Market Position of CFI
Having right product to solve lighting problems for architects/engineers Fixtures designed for specific types of building constructions “Try to satisfy particular lighting needs that are not filled by the giant fixture manufactures” GOALS:
Having right product to fit customers needs
Relationship with customer
Construction business is a team effort…have to give a little and take a little Not as price sensitive as producers of commonplace lighting fixtures