Executive Summary Merrill Lynch currently dominates the relocation services market. In line with CMI’s vision to expand and diversify, they recognize the significance of entering the relocation services market. Doing so would complement their existing services and enable them to compete more effectively against Merrill Lynch. As a result, CMI conceived the idea of establishing a “residential real estate financial services company” (Lewicki 576). On March 1st, CMI presented their proposal to the MetroNet Third Party Equity Committee, who subsequently accepted it.
With the approval of the committee, Randall and Dolan initiated discussions with CTS in March and April. CMI recognizes the worth of collaborating with Eliott Burr, a well-connected executive, and his team. While CTS is eager to be acquired, they have concerns about their ownership situation after the acquisition. Although there has been open communication regarding CTS operations, CMI is cautious about the proposed acquisition’s value and its impact on the relationships among all parties involved, including MetroNet.
On May 24th, the teams will gather to discuss and negotiate CMI’s offer of acquiring CTS. CMI’s main focus is to expand their financial services capabilities and create a strong network capable of competing with Merrill Lynch. Their primary objective is to acquire CTS at a reasonable price, in line with the vision presented to and approved by MetroNet. Additionally, they aim to retain key management personnel and establish a solid relationship with Elliot Burr.
Conservation of good relationships with the CTS owners makes a collaborative strategy more effective to implement for the long run. If a deal is not reached, CMI’s BATNA would be to either build a relocation services in-house or try to get a similar company. As there are currently no other known targets for the latter, and the former could be expensive and time consuming, a negotiated deal is the strong predilection. CMI has some negotiating power because they are aware that CTS is struggling financially, and are desperate for a buyer.
The owners’ intention in the negotiation is being undermined by this desperation. CMI, however, possesses power through their strong vision for the future. They have a clear vision, support from MetroNet, and are paving the way for collaboration among independent parties to compete with Merrill Lynch. On the contrary, CTS’ main focus is to maximize the sale price of the company. The owners have personally invested significant amounts of money and time into the company and wish to see a return on their investments.
CTS is motivated to sell the company quickly because it is draining their resources. In order to secure their profits, CTS wants to maintain partial ownership after the sale. This could be used as a bargaining tool in negotiations. CTS’s main source of power is their strong internal network, followed by their influence over MetroNet through CTS members on the board of directors. If the relationship between CMI and CTS were to deteriorate, CTS could persuade MetroNet to withdraw support from CMI.
Finally, it is known that CMI openly committed to acquiring CTS in an approved proposal, and there is prenegotiation pressure on CMI to follow through on their commitment. CTS negotiators are aware that CMI is just as desperate to buy as they are to sell. In order for a successful collaborative strategy to be achieved, there needs to be a strong level of conviction, honesty, and effective communication among all parties involved. Additionally, both CMI and CTS must be dedicated to understanding each other’s needs and demonstrate a sincere willingness to adapt their approach.
Both parties involved in the acquisition must be open to modifying their views, understanding that the combined effort can yield greater results. The aim is for CMI to successfully acquire CTS due to several reasons: CMI’s requirement to expand their business by serving more high-ratio loan clients and gaining access to the advantages provided by the MetroNet network. By doing so, CMI can generate increased profits for their mortgage insurance business without significant cost expansion.
According to a consultant’s report, the key to success for a relocation business is to offer services at a lower cost than if clients were to do it themselves. Therefore, it is crucial for CTS to provide services at a reasonable cost. The more services offered within their corporation at an optimal level, the higher the potential revenue per customer. Since CTS plays a significant role in generating real estate sales commissions for the Burr and Lehman affiliation, it is imperative for CMI to ensure similar opportunities for these partners in the newly merged entity. This will help maintain good relations with Elliott Burr, the networking expert who will bring in a steady flow of new business.
To establish a collaborative strategy, it is essential to focus on the connection between parties and the desired outcome. Reaching an agreement on a feasible price for CMI’s parent corporation and all key partners of CTS is crucial. However, CMI must not solely focus on the outcome during the negotiation process. The executives at CMI have a strong relationship with Mr. Burr, and they must ensure that even if the negotiation does not conclude in anyone’s favor, the relationship with him remains intact.
Considering CMI’s perspective, although their parent company approved $9 million for expenses, they were unwilling to spend more than $600K plus the book value of CTS for 100% ownership. Conversely, CTS believes they are worth $6.25 million, which includes $5 million plus an 80% stake.In addition, it appears that some executives at CTS are more focused on recovering their initial investment rather than effectively competing with ML in the employee relocation industry. To address this issue, it is important to clearly outline the potential options available. Considering that both parties have differing price expectations for CTS, CMI must devise alternative offer arrangements.
It is crucial to ensure that these alternative configurations consider CTS’ interest while maintaining CMI’s strategic advantage and not compromising their goal of creating a diversified financial company. After devising a collaborative strategy, CMI could begin the negotiation with CTS on May 24th, addressing the following points: provide research on CTS’ logistics and agree on assessment metrics, develop CMI’s vision for the mortgage services company that can surpass Merrill Lynch, and reassure CTS associates regarding the security of their investments.
