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David M Dodson Case Solution

Solution Id Length Case Author Case Publisher
1302 616 Words (2 Pages) H. Irving Grousbeck, Nick J. Mansour Stanford Graduate School of Business : E33
This solution includes: A Word File A Word File and An Excel File An Excel File

Being an efficient entrepreneur, Dodson always preferred to accept new challenges and perform his best shot in the cutthroat competitiveness of situations. Dodson quit his job in 1990 and established a search fund to buy Smith Alarm, which has the revenues exceeding $11 Million and supporting 138 employees. The business capabilities of Dodson reflected on the performance of Smith Alarm, and its revenues exceeded $17 Million. Dodson sold Smith Alarm in 1994 for $37 Million and decided to purchase a company having the annual revenues exceeding $100 Million. Auto Palace was a subsidiary to Rite Aid having the annual revenues amounting to $108 Million with 1200 employees. Dodson became interested in its acquisition when GL Capital tried to acquire auto palace (ADAP) but failed due to its mismanagement. Dodson contacted Hammer and Bartlett for acquiring ADAP, failure to deal with GL Capital made the Rite Aid more prudent in making a deal with Dodson. He earned the trust of Rite Aid and Bartlett by his ability to raise capital for the deal and ensured that he is a serious bidder. Hammer also assisted Dodson in getting the process of acquisition in-time. Hammer was the representative of DLJ, which was supporting Dodson in senior debts. He would be promoted to managing director if he became successful in making the deal of Dodson and Rite Aid.


Case Analysis for David M Dodson

Bartlett, who was senior to Hammer, and he was not in favor of this deal and imposed many hurdles in the way of the acquisition. But Dodson was not much dependent on DLJ evaluations; as he made due diligence himself by analyzing the financial reports of 100 stores of ADAP. He evaluated the performance of ADAP and concluded that the ADAP was not performing the same way as was before, since the last spring. ADAP was working without the president and senior vice president and did not even have its management information system (MIS) which made the ADAP more fluctuating in the future. Dodson was putting the best of his efforts to make the deal possible but Bartlett wanted the other potential bidder, to take the deal. The other potential bidder in the race was TVC which bided $71 Million for ADAP; TVC was the one who purchased Smith Alarms Systems and hence had an understanding with the Rite Aid board of directors. Dodson wanted to get exclusivity for Falcon in making the deal so that Falcon may appear the only bidder of ADAP and the investors would also be encouraged to collect the money. But Bartlett refused to make it for Falcon due to limited information.

On February 5, 1996, Dodson was going to meet Rite Aid along with Hammer and Floor, so that the deal may come to end. Dodson also evaluated ADAP to be $60-$70 Million worth as the company was having the average total asset over the last three years (1992-1994) after satisfying the current liabilities was 69 Million. The company was also facing the fluctuations in its performance, and it also has to make its own Management Information System, which makes the company to worth less than the current average net assets.

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