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Case: Jim Sharpe: Extrusion Technology, Inc.
Prepared by: Ali Badruddin
Gabe Grossi
Matthias Hampel
Lisa Huang
Prepared for: Professor Yuval Deustche
Date: Thursday, November 6, 2008
ENTR 4600
Case: Jim Sharpe: Extrusion Technology, Inc.
Jim Sharpe’s purchase of Extrusion Technology Inc was, overall, a good deal. Firstly, this business was a good fit for him because it met his three criteria. This was a business in the manufacturing stream, which was important because Jim has substantial experience working in these types of companies. The company was experiencing low profitability, a desirable trait since Jim had limited cash and could not afford anything else. In addition, Jim had to have 100% control, and this was not an issue in this case because the old owner no longer wanted to take part in the company. Nevertheless, the terms were negotiated in a way that left Jim with substantial risk of losing the business in case of default, while protecting the original owner.
The main issue that Jim faced in this case was how to mitigate the risk that originated from the contract negotiated with John (the previous owner) and the bank. With regards to financing, out of the $2 million, only $100,000 was obligation free; the rest was debt that required repayment of principal while accruing interest. Based on the agreement, in the event of Jim’s default on any paymen ...