Continental Carriers, Inc - The Case Centre

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Compact case

Case

Reference no. 9-291-080

Subject category: Finance, Accounting and Control

Authors: W Carl Kester (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1991

Version: 25 June 1991

Length: 5 pages

Data source: Generalised experience

Topics: Acquisitions; Capital structure; Debt management; Equity capital; Expansion; Financial analysis; Leveraged buyouts; Mergers & acquisitions

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Abstract

A US trucking company is considering using debt for the first time to acquire another company. The directors of the company are divided in their opinion of the likely impact of leverage on Continental Carriers' performance. Their differences must be reconciled and a decision reached about whether to issue new debt or equity to fund the acquisition. Students are introduced to the impact of leverage on performance variables such as profits, growth, earnings per share, and stock price. A rewritten version of an earlier case.

Location:

United States

Industries:

Transportation; Trucking

Size:

USD1 billion revenues

Other setting(s):

1988