Paragon Tool Case Summary

A. Executive Summary
Paragon Tool is a southern Ohio company that produces high-end machine-tools for manufacturers of aerospace engines, among others. Recent expansion efforts and investment costs incurred by the CEO, Nikolas Anaptyxi, have led to decreased profit margins in the recent years. The senior management team at Paragon Tool is split on the decision of acquiring MonitoRobotics or selling off the services division of the business. William Littlefield, the CFO, believes that the existing services division is a “drag on profits” and supports selling the services division. The CEO sees an opportunity to collaborate with MonitoRobotic and use their technology to improve troubleshooting service on Paragon’s machine tools. My recommendation …show more content…
Nikolas believes “growth is as American as Mom and apple pie” and with MonitoRobotics up for acquisition, it provides Paragon an opportunity to offer their customers a rapid-response troubleshooting service. However, Nikolas knows that it is important to have profitable growth and not grow for the sake of growing. Unfortunately, the growth of the company and the recent acquisitions in the industrial signage and electronic-labeling field has come with a cost of decreased margins. Paragon Tools’ CFO, William Littlefield, is a risk averse man who is for downsizing the company and selling off the profit-dragging services division (Stakeholder’s Analysis in Appendix C). William’s concern is justified since research has shown that companies typically spend more than $2 trillion in acquisitions with a 70%-90% chance of failure (Appendix E4). Based on the Industry Conditions in the 5C’s Analysis, the machine tool manufacturing industry’s potential for profit is fairly neutral. In order for Paragon to create a competitive advantage in the industry, they must differentiate themselves. A way for them to create value is to use the advantage of MonitoRobotics as a collaborator and use their technology to enhance Paragon’s products (Refer to 5C’s Analysis in Appendix A and SWOT analysis in Appendix B). Since Paragon is …show more content…
Acquire MonitoRobotics
a. Pros
• Paragon can gain market share in the services business and steal market share from its competitors.
• Paragon can offer their customers valuable troubleshooting service more quickly than if they developed the technology themselves. Their software technology would become the standard from machine-tools.
• Cross-selling opportunities to similar customers.
• MonitoRobotics will likely accept a friendly offer from Paragon Tools instead of a hostile bid from r Bellows & Samson.
b. Cons
• This acquisition is costly and would delay returns to margins and possible profit growth.
• Significant expenses would be incurred in the near term, including additional software research, hiring and training, pension funds for employees that were laid off, and brand development.
• Negative attention from Wall Street if earnings continue to be bad.
• Difficult to integrate the company's technology with ours and adapt it to equipment beyond the robotics field.

2. Sell Paragon’s services business
a. Pros
• The company can finally realize profit in the short term from eliminating the continued losses that Paragon had been experiencing in the services

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