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Case | HBS Case Collection | July 2014

Paramount Equipment, Inc.

by Carliss Y. Baldwin and Wei Wang

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Abstract

Paramount Equipment, Inc., based in Fort Wayne, Indiana, is a large manufacturer of cranes and compact construction equipment, aerial work platforms, and food service equipment. Founded in 1987, Paramount now had manufacturing operations in 24 countries. However, it lost its competitive position because it took on too much debt in the form of bank borrowings relative to the risk level of its business. Now the company must seek funding and guarantees in order to restructure its debt. Paramount's future depends on whether existing lenders, management, and the government of Ontario—where the company employs more than 7,000—can reach a feasible restructuring and refinancing plan fast and whether Paramount was able to secure a capital injection from new investors. Students must determine the optimal capital structure policy consistent with competitive risks and assess available tools for financing a company in financial distress. The case requires students to perform only limited quantitative analysis and is ideal for use in first-year MBA courses in financial strategy or corporate finance. It would also work well in advanced undergraduate finance courses that cover capital structure and financial distress.

Language: English Format: Print EducatorsPurchase

Citation:

Baldwin, Carliss Y., and Wei Wang. "Paramount Equipment, Inc." Harvard Business School Brief Case 914-557, July 2014.

Related Work

  1. Teaching Note | HBS Case Collection | July 2014

    Paramount Equipment, Inc. (Brief Case)

    Carliss Y. Baldwin and Wei Wang

    Citation:

    Baldwin, Carliss Y., and Wei Wang. "Paramount Equipment, Inc. (Brief Case)." Harvard Business School Teaching Note 914-558, July 2014.  View Details
    CiteView DetailsPurchase Related
  2. Supplement | HBS Case Collection | July 2014

    Paramount Equipment, Inc., Spreadsheet for Students (Brief Case)

    Carliss Y. Baldwin and Wei Wang

    Citation:

    Baldwin, Carliss Y., and Wei Wang. "Paramount Equipment, Inc., Spreadsheet for Students (Brief Case)." Harvard Business School Spreadsheet Supplement 914-559, July 2014.  View Details
    CiteView DetailsPurchase Related
  3. Supplement | HBS Case Collection | July 2014

    Paramount Equipment, Inc., Spreadsheet for Instructors (Brief Case)

    Carliss Y. Baldwin and Wei Wang

    Citation:

    Baldwin, Carliss Y., and Wei Wang. "Paramount Equipment, Inc., Spreadsheet for Instructors (Brief Case)." Harvard Business School Spreadsheet Supplement 914-560, July 2014.  View Details
    CiteView DetailsPurchase Related

About the Author

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Carliss Y. Baldwin
William L. White Professor of Business Administration, Emerita

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More from the Author

  • Case | HBS Case Collection | November 2019

    Apple, Einhorn, and iPrefs (Abridged)

    Carliss Y. Baldwin and W. Carl Kester

    In March 2013, Apple Computer has a very large cash balance, and is under pressure to return cash to shareholders. Hedge fund manager David Einhorn thinks Apple can "unlock value" by issuing perpetual preferred stock, dubbed iPrefs. Henry Blodget, CEO of Business Insider, disagrees, saying "you can't just wave your magic wand and make something of nothing." This short case is designed to support a discussion of "perfect" markets and the Modigliani-Miller capital structure irrelevance propositions. The case focuses on two questions: (1) From a shareholder's perspective, how is Apple's cash different from cash in a bank or money market account? (2) Can Apple create significant value for shareholders by splitting each common share into an iPref plus a common share?

    Keywords: markets; Stock Shares; Value Creation; Business and Shareholder Relations;

    Citation:

    Baldwin, Carliss Y., and W. Carl Kester. "Apple, Einhorn, and iPrefs (Abridged)." Harvard Business School Case 220-043, November 2019.  View Details
    CiteView DetailsEducators Related
  • Working Paper | HBS Working Paper Series | 2019

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 16 Capturing Value by Controlling Bottlenecks in Open Platform Systems

    Carliss Y. Baldwin

    The purpose of this chapter is to investigate the means by which firms capture value in open platform systems. I begin by arguing that the surplus value created by complementarities within a technical system will be split among the owners of the unique and essential components—the strategic bottlenecks in the system. However, most platforms must also execute a series of steps that are subject to “flow production” bottlenecks. Finding and fixing these flow bottlenecks is another way to capture value. In addition, two types of platform improvements provide further opportunities for value capture. “Accelerators” speed up the processing of options, while “subsidiary” platforms increase the range of options available to users. Finally, members of a platform system or new entrants may seek to supplant the owner of a strategic bottleneck by “disintermediating” platform components. I describe four generic methods of disintermediation: substitution, reverse engineering, platform independent complements, and platform envelopment.

    Keywords: open platforms; bottlenecks; flow production; Value Capture; disintermediation; Production; Management;

    Citation:

    Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 16 Capturing Value by Controlling Bottlenecks in Open Platform Systems." Harvard Business School Working Paper, No. 20-054, November 2019.  View Details
    CiteView DetailsSSRN Read Now Related
  • Working Paper | HBS Working Paper Series | 2019

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 17 The Wintel Standards-based Platform

    Carliss Y. Baldwin

    The purpose of this chapter is to use the theory of bottlenecks laid out in previous chapters to better understand the dynamics of an open standards-based platform. I describe how the Wintel platform evolved from 1990 through 2000 under joint sponsorship of Intel and Microsoft. I first describe a series of technical bottlenecks that arose in the early 1990s concerning the “bus architecture” of IBM-compatible PCs. Intel’s management of buses demonstrates how, under conditions of distributed supermodular complementarity, a platform sponsor can reconfigure the modular structure of a technical system, property rights within the system, and its own zone of authority to increase system-wide throughput, while protecting its own strategic bottleneck from disintermediation. I go on to describe how Microsoft used platform envelopment to establish a second strategic bottleneck in productivity software and later to respond to the threat of disintermediation from platform-independent internet browsers. I end the chapter by discussing the conditions under which shared platform sponsorship can be a long-term dynamic equilibrium.

    Keywords: open platforms; bottlenecks; Wintel platform; disintermediation; Hardware; Software; Business History; Computer Industry;

    Citation:

    Baldwin, Carliss Y. "Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 17 The Wintel Standards-based Platform." Harvard Business School Working Paper, No. 20-055, November 2019.  View Details
    CiteView DetailsSSRN Read Now Related
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