Capital Mortgage Insurance Corporation - Essay Example

Negotiation Case Study "Capital Mortgage Insurance Corporation" The purpose of this paper is to provide a case study analysis for the Capital Mortgage Insurance Corporation Case. The format that will be utilized will be for this paper to provide a brief summary of the case followed by directly answering the questions provided in the case. Lastly this paper will provide recommendations for a possible solution. In regards to a summary of the situation one should provide an analysis of CMI and CTS. The original business focus of Corporate Mortgage Insurance (CMI) Corporation was the selling of mortgage guaranty insurance policies to residential lenders in the American Market in the event that the customers default on their loans. As with many different insurance companies CMI was looking to branch out into other fields by becoming a more integrated financial services provider and the Frank Randall began the search for acquisitions that can make CMI directed towards being a more residential real estate services company. Corporate Transfer Services (CTS) is an organization dedicated to the relocation of corporate employees and the real estate functions that are associated with said transfers. The acquisition of this firm would represent a diversification of CMI into a field that would make them a more integrated real estate services company. Discussion Question #1: Prepare a negotiation strategy that can be utilized by Randall and Dolan. What is important for this section is that both Randall and Dolan have found sufficient background information on CTS. Whilst it may be the case that he employee relocation market is big (Estimated at 500,000 relocations annually) What is important to remember is that the company according to the case has “Barely even reached a break even point” and that it is only through years of additional work of building up the business can CMI or CTS really recognize a profitable enterprise. Given the stature and experience of the CTS Board it would seem foolish to take a ‘Hard’ or ‘Soft’ Stance on negotiation as these men (Specifically Elliott Burr) would probably not respond favorably to these strategies. As it is the case that CMI Does not want to pay the $600,000 over the book value of the business and a $400,000 over the book value was offered it is a case of trying to persuade the four CTS executives to meet CMI at a middle ground. As such a “Principled negotiation strategy” should be employed in which the four stages should be focused on identifying exactly the book value of the firm is, focus on how much CMI wants to build on CTS’ business model, identify that no matter what CTS will be getting a premium on their business and always focus the criteria on objective measures. Discussion Question #2: CMI should be expecting from CTS a somewhat reluctant negotiation session insofar as CMI has already offered les money than CTS is expecting. As the case identifies that Burr is a classic real estate salesman and will probably have extensive experience in negotiation and negotiation strategies. Lehman, is more of a financial advisor and will probably have a very firm understanding of the firm’s financial position as well as their future potential. Kupchak is a mortgage banker and recognizes the high rate of return associated with mortgages, and Winder is the firms lead sales professional and fully understands the running of the operation. All of these men together represent fairly savvy business people. As such one could expect that they are going to ‘humanize’ the arguments insofar as they will want to put a human value on their business model. The only way to combat this strategy is to stick to objective measures (Dollars and cents). As it is the case that no matter what CMI will be offering a price over the book value of the firm. CMI also recognizes that there the Corporate Transfer of employees is a growing trend in the United States and as such the related service opportunities are going to be growing in the near future as well. As the case also highlighted that the CMI Recognizes that CTS is “Running a responsible organization in a basically sensible manner.” As it is the case that it is a fairly well run firm in a growing industry CTS will probably use this information as leverage. Although it may be the case that CTS is under some pressure for their bankers to basically improve their financial performance, CTS can still reassert their growth opportunities in the future. Probably the most important point to take away from this entire case study is the fact that CTS recognizes that CMI really wants to purchase their business as part of CMI’s diversification program. This represents a significant challenge for CMI insofar as it may be the case that the executives as CTS can simply reiterate that they can simply continue to run the business as is and turn a profit in the next few years. Conclusion and Strategy: In conclusion as highlighted earlier, a principled negotiation strategy (Fisher, 1981) should be employed in which CMI should utilize a four stage approach to their negotiation 1. Separate the people from the problem: As it is the case that CTS is not currently in good financial standing and it will take years of dedicated hard work to really move the business “Into the black” the managers at CMI can simply stress the point that Burr, Lehman, Kupchak and Winder can simply turn an immediate profit and redirect their efforts to new projects. 2. Focus on interests, not positions: As it is the case that the lower desired asking price will probably represent a problem for CTS, CMI should constantly redirect this pain point to the fact that they will still be getting a price that is over market value and CMI will offer an easy transition. 3. Invent options for mutual gain: CMI can offer other incentives such as stakeholder claims for the executives at CTS as an alternative to simply raising the original offer. 4. Insist on using objective criteria: As it may be the case that CTS Will continue to try and humanize their business, CMI should constantly reiterate the fair market value of CTS and further promote the fact that this offer will represent a huge financial gain for the CTS. Furthermore if the initial offer is rejected CMI still has an extra $200,000 before reaching their ceiling price which gives them at least some room to maneuver. References Fisher, R. (1981) Getting to YES: Negotiating Agreement Without Giving In. Penguin Group. Read More