Considering the current financially bearish trend in Pan Europa, the entity needs to work on multiple yet chain corporate activities to avoid hostile takeover. Below are some strategies, which can be used by the company:
i) To begin with, the company must channelize its investment in those projects that will assist the growth in the revenue figures and net income. It is also important for the company not take any additional debt and accept projects within their capital budget as the banks have already signaled red warning for unsustainable debt-equity position of the company with a rejection to grant any additional credit as the company is already highly leveraged compared to other companies in the industry. Analyzing the past performance of the company, we found that for the past three years, the net income has been in negative range of $2 million-$12 million financial losses. Therefore, it has become the need of utmost importance that the company now gain the confidence of their shareholders by investment in capital projects with highest NPV, as this will directly relate to the stock price of the company.
ii) Pan Europa should not decrease the dividend of the company, as doing so will send negative signal amongst the investors. In fact, company should focus on increasing its net income figures and continue to pay consistent dividends to the shareholders. This will also boost shareholder confidence, and they will retain the stocks and not made them available for outside raiders.
In short, when sentiments of the shareholders remain strong and stock price remains high, there is decreased likelihood of a potential hostile takeover.
b. What rows categories in Exhibit 2 will thus become critically important in 1993? What should Pan-Europa do now that they have won the price war?
Since the company was successful in gaining market share, it should now prove its standing to the customers, and should be ready to fulfil short-term as well as long-term expectations of the customers through innovative product line, efficiency improvisation and ensuring strong hold over the market share. Therefore, while the company thrives to gain the confidence of its shareholders and cash on over its hard earned market share, financial metrics such as earnings per share, dividend per share and shareholder equity will be critically important in 1993.
c. Who should lead the way for Pan-Europa?
In my opinion, only Nigel Humbolt deserve to lead the way for Pan Europa while he can also be assisted by Fabienne Morin. Both these employees have shown their innovative approach at work and more than efficient attitude. As for Humbolt, he suggested the best project for the company by acquisition of Schnapps Brand. While the project investment is under the limits of capital budgeting, it is also enticing in terms of profitability and diversity to approach the varied class of customers. On the other hand, it was Morin who designed the price war and was the lead advocate, is yet another deserving candidate to lead the company.
