Maxim Off Highway Axle Business: An Acquisition Opportunity (A)

The president of Zeus Strategic Investments Inc. was reviewing an acquisition opportunity related to a spin-off of a division of Maxim Automotive. This opportunity was exactly the type of thing that excited the president — a non-strategic business unit within a large industrial organization that faced significant challenges in forming into a standalone business. The president felt that it provided an excellent opportunity to create significant value in a very short period of time with a very small amount of equity. <br><br>He was particularly concerned about getting a clear grasp on the historical and projected financial statements provided by Maxim. Historical financial information would need to be extracted from the Maxim corporate records and adjusted to reflect the anticipated transaction, including removing some corporate allocations and reflecting the potential additional costs of operating the business on a standalone basis. The president was also concerned about the accounting for liabilities and potential liabilities in the division statements, as most often these liabilities were carried at the corporate level, rather than at the division level.

This case series can be used at the undergraduate or MBA level to discuss an acquisition opportunity from the point in time of original contact through to the negotiation of the purchase price, including the due diligence process. The case series has been used in an advanced accounting class to illustrate the managerial side of accounting for acquisitions, which is typically the focus of advanced accounting. It provides the students with an opportunity to think beyond the numbers to issues of strategy, human resources, marketing, and financing. The case series would be suitable for a finance class focused on business acquisitions.

• Acquisitions
• Valuations
• Accounting for Acquisitions
• Acquisition Strategy
• United States