Capital Mortgage Insurance Corporation (a)

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Lewicki−Barry−Saunders: Negotiation: Readings, Exercises, and Cases, Fifth Edition


1. Capital Mortgage Insurance Corporation (A)

© The McGraw−Hill Companies, 2007

Case 1

Capital Mortgage Insurance Corporation (A)
Frank Randall hung up the telephone, leaned across his desk, and fixed a cold stare at Jim Dolan.
OK, Jim. They’ve agreed to a meeting. We’ve got three days to resolve this thing. The question is, what approach should we take? How do we get them to accept our offer?

Randall, president of Capital Mortgage Insurance Corporation (CMI), had called Dolan, his senior vice president and treasurer, into his office to help him plan their strategy for completing the acquisition of Corporate Transfer Services (CTS).
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CMI had a mixed record of success within the private mortgage insurance industry. Frank Randall, the company’s first and only president, had gotten the organization off to an aggressive beginning, attaining a 14.8 percent market share by 1972. By 1979, however, that share had fallen to just over 10 percent even though revenues had grown from $18 million in 1972 to over $30 million in 1979. Randall attributed the loss of market share primarily to the difficulties created by the bankruptcy of CMI’s original parent. Thus he had been quite relieved when Northwest Equipment acquired CMI in January 1978. Northwest provided CMI with a level of management and financial support it had never before enjoyed. Furthermore, Northwest’s corporate management had made it clear to Frank Randall that he was expected to build CMI into a much larger, diversified financial services company. Northwest’s growth expectations were highly consistent with Frank Randall’s own ambitions. The stability created by the acquisition, in combination with the increasing solidity of CMI’s reputation with mortgage lenders, made it possible for Randall to turn his attention more and more toward external acquisitions of his own. During 1978 Randall, with Jim Dolan’s help, had investigated several acquisition opportunities in related insurance industries, with the hope of broadening CMI’s financial base. After several unsuccessful investigations, the two men had come to believe that their knowledge and
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