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Management article
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Reference no. R0209X
Authors: Paul Hemp
Published by: Harvard Business Publishing
Originally published in: "Harvard Business Review", 2002
Revision date: 15-Feb-2013

Abstract

For teaching purposes, this is the case-only version of the HBR case study. Paragon Tool, a thriving machine tool company in an increasingly tough industry, has been pouring money into growth initiatives. These efforts have shrunk the company's margins, but CEO Nikolas Anaptyxi believes they'll provide the foundation for a profitable future. Now Paragon is weighing the acquisition of MonitoRobotics, a company with proprietary technology for monitoring the functioning of robotics equipment. The acquisition, which would nearly double Paragon's revenue, could help transform Paragon from a slow-growth manufacturer into a high-growth technology company, bolster its struggling services business, and ultimately allow it to set the standard for how machines communicate with one another. At least, that's what the CEO thinks. Paragon's CFO, William Littlefield, isn't so sure. He says the move would introduce all the risks that come with acquisitions and put further downward pressure on profits. Paragon's management team is divided, and Anaptyxi must decide how to move forward. This case study explores growth issues that companies in many industries currently face. The specific dilemma here is, How far should Paragon go in sacrificing profits up front with the aim of generating real profits down the line?

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Abstract

For teaching purposes, this is the case-only version of the HBR case study. Paragon Tool, a thriving machine tool company in an increasingly tough industry, has been pouring money into growth initiatives. These efforts have shrunk the company's margins, but CEO Nikolas Anaptyxi believes they'll provide the foundation for a profitable future. Now Paragon is weighing the acquisition of MonitoRobotics, a company with proprietary technology for monitoring the functioning of robotics equipment. The acquisition, which would nearly double Paragon's revenue, could help transform Paragon from a slow-growth manufacturer into a high-growth technology company, bolster its struggling services business, and ultimately allow it to set the standard for how machines communicate with one another. At least, that's what the CEO thinks. Paragon's CFO, William Littlefield, isn't so sure. He says the move would introduce all the risks that come with acquisitions and put further downward pressure on profits. Paragon's management team is divided, and Anaptyxi must decide how to move forward. This case study explores growth issues that companies in many industries currently face. The specific dilemma here is, How far should Paragon go in sacrificing profits up front with the aim of generating real profits down the line?

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