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TITLE:

Title : OT snack company

Members :
Prof :
Situation :

James Fussell had a lifelong dream of owning and running his own business.
After losing his job as controller of a medium sized corporation for the second time in
three years , he began giving it even more thought. In both cases the firm Fussell
was working for had been purchased by another firm and most of the acquired firms
top managers had been let go . Owning his own firm was one way to avoid being
subjected to the decisions of others that could change his life so quickly . With this
goal firmly in mind , Fussell simultaneously started looking for a job to pay his
present bills and for a company to own that would give him the sense of control and
satisfaction he had dreamed about. James Fussell was born and raised in Florida .
he graduated with a degree in management from he University of South Florida in
1971 . After college he accepted a job with the accounting firm D.E Gatewood ,
certified public accountant .

To improve his accounting skills he completed 36 additional hours of accounting

courses . Fussell took and passed the certified public accountant exam . “ I felt an
accounting background was needed for running my own business in the future , and
that by working with a certified public accounting firm would strengthen that skill and
learn about many different types of firms “. After 5 years , Fussell took job with Blue
Bell , Inc . In Greensboro , north Carolina .

Blue bell , Inc . was a publicly owned corporation in the very competitive textile
business , and although profitable , its return on investment was not good as high as
some stockholders of the company desired. The decision was made to take the
company private , and a group of Blue bell executives made an offer that was
accepted by a majority of the stockholders . To reduce expenses and help pay off
the debt incurred in purchasing Blue bell , the new owners drastically reduced the
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scope of operations and eliminated many middle and upper level management
position . Fussel was among those who were forced out .

Fussell was fortunate and quickly found a job with Thomasville Furniture
company. He started in March but by October , that company had been purchased
by Weyerhauer, Inc., a much larger multidivision corporation , and Fussell was once
again looking for a job . This time he was determined to locate a job that would be
temporary until he could find a firm to own and run. With his accounting skills and
past background , he would quickly found a position with old salem , a historical
preservation foundation , as a controller . At the same time he contracted several
business brokers about helping him locate a firm for sale . He also enlisted the help
of literally dozens of friends and acquaintances. Fussell considered several
businesses but reject them as not the type he wanted . In October 1993 , his broker
asked him to look at OT snack company , which he described as a bakery . Fussell
though it was a bakery in a shopping center an was not enthusiastic , but after
visiting the business he became very excited .

OT snack was formed by Alton Bodenheimer and Grady Griffin , Jr. , in 1949 .
The fried pie has been the firms only basic product , although at one time it produced
a honeybun , production of that item was discounted in 1977 . The company slowly
built up its business by selling to vending machine companies and through
distributors who sold the pies as a desert to the lunch counter trade . The owners
concentrated on quality and service and expanded sales throughout the Carolinas ,
virgina , tenessee , and Georgia . By the end of 1993 OT snacks employes 52
people and purchased between 400,000 and 500,000 dozen of pie , raisin ,
chocolate and lemon.

OT employed 46 people in production and the average pay was $5.50 per
hour . Turnover was very low , and 31 of the employees had been given gifts of stock
in the firm . This stock amounted to 10 percent of all the outstanding shares. OT also
had a very good benefit program. The production operationwas managed by John
Davis , who had worked for OT since mid-1964. John had worked in all phases of
plant operations and knew the production operation and the cycle of the business as
well as anyone . Although turn over was very low , production efficiency was also low
,. Sales has been declining since 1987.

Part of this casual attitude was due to the fact tht the city of Winston- Salem
had not issued any building perits since 1984 in the south marshall street
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redevelopment area where OT was located . The city planned on

redeveloping the area with upscale condominiums . OT’s current sole owner , Alton
Bodenheimer , was too near retirement to pplan for move to a new location . With the
future of the present location in limbo, he had allowed the business to decline . All of
the production equipment was old and outdated , for there relocated in the near
future . The equipment , however , had no salvage value and was in the need of
immediate replacement.

In addition , no new customers had been added in several years and the
business served a static customer base. Evidence of the lack of current marketing
was that none of OT’s product were sold in local grocery stores. An indication of
Bodenheimer’s attitude was shown in early 1992 when he asked if he was looking
forward to retirement . His reply was “ hell , I’ve been retired for 10 years !” one
employee said that a typical day of Bodenheimer was to come into the plant in the
morning and see what order they had go to a local coffee shop for about an hour and
half and come back to the plant until lunchtime and then , shortly after lunch go to
play golf . The redevelopment project and the thought of having to move had simply
taken away his desire to plan for the future of the company

Fussell went over all the facts to make sure that he had thoroughly
investigated the firm and its potential . He then made two income projections for
1994 sales salaries down Shown in exhibit 3 , were based on what Fussell expected
to pay the two managers who were presently on salary ; the management fee was
what he hoped to earn . The first income projection was based on sales of $1.2
million and assume that the pie operation would operate with the automated
production line . The section projection ssumed a sales level of about $2.7 million
exhibit 4.

Before finally deciding on whether to purchase OT Snack Company , Fussell

did a quick marketing survey . The firm had about 15 current customers who ordered
one or twice a week . In addition , e found that several potential customers had
contacted OT in the recent past . These customers included vendors supply of north
Carolina , waldensian bakeries and fox bakeries , all located in north Carolina ,
palmetto bakeries in south Carolina and vending services of America , located in
georia . Several of these firms were primarily bread and bakery goods distributor
who were looking for additional products to sell to their customers supermarket ,
convenience store , service stations , etc.
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Jamer Fussell thinks he has done a very exhaustive study of OT Snack and
the potential of the fried pies market in the region presently served by OT. Although
sales have declined in the last few years , Fussell believes that the company still
produces a quality product and gives excellent service to its current group of
customers. The potential for the firm seems outstanding . After checking with his
banker , Fussell knows he can purchase the business based on a loan on the assets
of the firm , cash from his savings and investments , and a mortgage on his home
and all his personal assets.

Fussell faces two very important decisions , should he take the plunge and
buy this firm ? Given an affirmative answer to the first decision , he must then
determine what price he would be willing to pay for OT snacks Company . He
actually would be purchasing 90 percent of the stock , since the employees own 10
percent .
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Introduction and Background of the topic

OT Snack company was formed by Alton Bodenheimer and Grady Griffins

and it was offered to James Fussell for acquisition . James is still deciding if he
would acquire that OT Snack company considering the present status of the
company .

James Fussell has done a very exhausted study about this company , he believes
that the company stil produces quality products and give excellent services to their
future customers
The OT Snack company needs to improve and development . he still believes that
the sale will increase in the future .
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Summary of your Results / Solutions :

Based on my research there are things to consider in acquiring a company

. James Fussell should form an acquisition team . composed of An executive
manages the team to ensure the success of the acquisition. This person also reports
progress to the board of directors. An investment banker handles your finances and
looks into the stability of the company you are acquiring. An acquisitions lawyer
understands the rules of transferring ownership. A human resources expert
organizes the staff from the new company. An IT specialist merges your technical
infrastructure with that of the new company. A public relations officer promotes the
merger to the public. This person informs your business partners and customers
about the new merger. These people will work to provide useful information on the
company. They will determine what can become a part of your business and what
should not.

He should reach an agreement that ends in the happy merger of two companies. Be
firm but don't undermine your success by being too harsh. Try not to overpay and
work toward an agreement that benefits both parties. Evaluating an acquisition
candidate is determining whether the asking price is reasonable. The metrics
investors use to place a value on an acquisition target vary from industry to industry;
one of the primary reasons acquisitions fail to take place is that the asking price for
the target company exceeds these metrics.

If things go well, its time settle on a price, but this process is about more than
money. This is about understanding why the owners are making their counteroffer.

Find out why the company is incentivizing the sale. See if there might be something
wrong with the company. This will give you a clearer idea of what you are buying.

After you have settled on a price, work over the soft issues. Figure out who stays
with the company and who you will have to let go. This part can be emotional, so be
sensitive and try to keep as much of the talent in the company as possible .

It is also the best idea to take over a business that specializes in your areas of
interest and expertise. Think about your hobbies and topics that you are passionate
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about. Acquiring a business means fully investing yourself as an owner amongst

your employees and peers. The more you know about an industry, the easier it will
be to run the business itself. Look to acquire businesses that you have had past field
experience. This will make it easier for you to relate to your future employees and
clients.

James should assess his skillset and experiences in acquiring a business he has to
review the current status of the business . Some times businesses are sold for a
number reasons including owner’s age profile, health reasons, divesting of non-core
operations, a requirement for increased investment in the business or possibly a
personal financial shock can place the business in distress if not sold. An
accountant evaluate the financials of the business very carefully to make sure the
historical financial performance represents a true reflection and correlates to the
price being asked.

Fussell also learned about an automated equipment line that would produce pies .
he flew to Minnesota , to see the equipment in operation . The production line was
produced by Moline corp. and cost $ 497, 000 to purchase and install , The
equipment produced pies in continues conveyor . At one end , the dough was
produced and extruded onto a sheet and rolled to the appropriate thickness ,
trimmed and cut , with the scrap dough recycle back to the beginning . The pie was
then fed into the fryer which was maintained at a constant temperature , and the pies
were cooked for exactly three minutes .
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Conclusion :

If I were James Fussell I will consider to acquire the OT Snacks Corporation .

Based on this case this company is still performing slowly . he just need develop the
system . He need to upgrade the company. The company still have clients for their
products , the company can still supply fried pie to their clients . Aside from that they
need to innovate their fried pie so they can still compete with their competitors.
Fussell still believes that they can still provide quality pies for their customers . The
potential of this firm seems to be outstanding . After consulting to his banker he can
still purchase the business based on a loan on the asset of the firm , cash from his
savings , investments and a mortgage on his house and all his personal assets .
Acquiring the OT Snack company is still a good decision to consider .

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