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Management article
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Reference no. R0109A
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 2001

Abstract

During his first three years as Chief Executive Officer (CEO), Lloyd Byrne transformed Bretplex from an uninspired family-controlled company in the machine tool business into a midsize industrial conglomerate. Sales doubled, market value tripled, the company''s management team grew stronger, and the board''s makeup was enhanced by the appointment of several glamorous non-executive directors. After that strong beginning, however, Bretplex''s previously unstoppable growth ground to a halt. The turning point was the company''s acquisition of Hazlemere Measures, a British equipment manufacturer. The price of the acquisition had been bid up by an aggressive competitor, and the market believed Bretplex paid too much. Soon, other acquisitions were being examined. Worse, the company began missing its revenue estimates and revised them downward only as reporting dates drew near. More uncertainty emerged when Laura Barrington, the Manager of an activist shareholder fund, began asking whether Lloyd had what it would take to lead the company to recovery. Board members Harriet Poole, a CEO herself, and Jefferson Souza, a strategy guru, debate solutions for Bretplex. If the company fires Lloyd, Jefferson says, the market will think the company is serious about getting its house in order, and Barrington and the fund will probably back off. Harriet, distracted by events at her own company, fears that it will be highly disruptive for Bretplex to lose its much-admired leader and, possibly, some of its senior managers. She is inclined to stick with a restructuring plan just approved by the board.

About

Abstract

During his first three years as Chief Executive Officer (CEO), Lloyd Byrne transformed Bretplex from an uninspired family-controlled company in the machine tool business into a midsize industrial conglomerate. Sales doubled, market value tripled, the company''s management team grew stronger, and the board''s makeup was enhanced by the appointment of several glamorous non-executive directors. After that strong beginning, however, Bretplex''s previously unstoppable growth ground to a halt. The turning point was the company''s acquisition of Hazlemere Measures, a British equipment manufacturer. The price of the acquisition had been bid up by an aggressive competitor, and the market believed Bretplex paid too much. Soon, other acquisitions were being examined. Worse, the company began missing its revenue estimates and revised them downward only as reporting dates drew near. More uncertainty emerged when Laura Barrington, the Manager of an activist shareholder fund, began asking whether Lloyd had what it would take to lead the company to recovery. Board members Harriet Poole, a CEO herself, and Jefferson Souza, a strategy guru, debate solutions for Bretplex. If the company fires Lloyd, Jefferson says, the market will think the company is serious about getting its house in order, and Barrington and the fund will probably back off. Harriet, distracted by events at her own company, fears that it will be highly disruptive for Bretplex to lose its much-admired leader and, possibly, some of its senior managers. She is inclined to stick with a restructuring plan just approved by the board.

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