Overview
Purchased history
Materiaux Boisvert is the company, which was founded in1992 in Chioutimi Quebec. Its main business is mainly to sell hardware and building materials to retail customers as well as industrial contractors. This company had a good reputation for its customer service and had a loyal customer base. The business was very successful at that timewith sales of $20 million in 1995, which resulted in profits of $500,000 for the same years.However, in 1996, there is a big event happened on Materiaux Boisvert. Produits Forestier Saguenay, a large company whose core business was the manufacture of hardwood materials for export, purchased Materiaux Boisvert. The owners of PFS saw the cash potential of Materiaux Boisvert and set it as a separate division of PFS. Management goals focused solely on the desire to make money.Nevertheless, due to the management style changing, a constant friction was created between managers and employees in1997. The worse is that its well-known reputation of customer service starts to be affected.the company suffered three consecutive years of losses. Finally, Materiaux Boisvert was purchased again by Lachapelle familyin September. New owner background
Mr. LachapelleFrancois, the new owner of Materiaux Boisvert, whosefather was a well-respected client of the crown bank of Canada, which was financing a line of credit for his first company. Francois was very familiar with hardware industry; he used to work every position in their family business. He has a professionaleducationbackground that he got a master degree in BA. He is ambitious and has much idea in this industry.
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Market information
In Chicoutimi, the retail and industrial markets for hardware and building supplies were very seasonal.The market is hot in summer especially in May while the off season is in June. Besides, Retail sales were affected badly by economic swing. TheChicoutimi market was mainly served by two kinds of competitor. Pure hardware and building supply outlets and mass merchandisers the chain store whileCanadian tire was the only mass merchandiser in Chioutimi. The competition of building supply and hardware is very intensive Chicoutimi. Main issue
Yvan Martinault, who is a commercial account manager at the main branch of the crown bank of Canada in Chicoutimi, Quebec, dealt with this case of increasing the line of credit for Materiaux Boisvert. FrançoisLachapelle an increase in the company’s line of credit from $1.6million to $2.2million while Yvan think thatMateriaux Boisvertonly needs $1.8 million of the working capital regarding to previous financial forecasts.Therefore, this is main issue, whether to increase the line of credit? How much does Materiaux Boisvert really need?
Problem
Materiaux Boisvert was given a liberal maximum line of credit of $3.2 million because of the size and equity position of PFS.However, TheLachapellefamilydid not have similar equity to place in the business and the loan was subsequentlyto $1.6 million.
“The purchase of materiaux boisvert caused significant changes to the financial position of the company under new management”. Will the same thing happen to Materiaux Boisvert just like it did on PFS before?
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Materiaux Boisvert was no longer a division of PFS and, therefore, theinvestments and interdivisionalaccount from PFS would no longer be relevant because Materiaux Boisvert is sold. Who is going to be economic support? Regarding to the case, “The purchase of materiaux boisvert resulted in the creation of a new business entity for the Lachapelle. Therefore,2002 opening retained earnings would have zero balance.”That is not a good news. Lachapelle has no money now.
“Finally, François’s plans for turning the business around required a different set of operating assumptions than under previous management.”This is also a new problem of management style changing conflict.
Reference
1. LeeannMalik. Materiaux Boisvert ltee. IVEY. 1992.Second paragraph, Third sentence 2. LeeannMalik. Materiaux Boisvert ltee. IVEY. 1992. Third paragraph, firstsentence 3. LeeannMalik. Materiaux Boisvert ltee. IVEY. 1992. Fourthparagraph, first sentence 4. LeeannMalik. Materiaux Boisvert ltee. IVEY. 1992. Tenth paragraph, Secondsentence.
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