REALLY GOOD YARN COMPANY Harvard Case Solution & Analysis

REALLY GOOD YARN COMPANY                                               Case Solution

Introduction

Really Good Yarn Company was founded in the year 2010 and it is situated in North America. The company is growing continuously by operating both web based and retail stores. Big Mama is the present owner and CEO of the company and owes 93% shares of the company. Big Mama wishes to retire as a CEO and it is expected that against this holding Big Mama requires $500,000.

Possible Exit Plan

The present CEO, Big Mama, is 65 years old and requires an exit plan as she no longer wants to continue the operations and wants to windup the business in the most efficient manner. It is expected that Big Mama has different available options in order to realize her investment or in order to discontinue the business operations.

Management Buy Out

In most cases the management of the company tries to buy the company in order to secure the jobs. But in this scenario, the management only wishes so if the company is performing well and generating positive cash flows. The company is performing well and there is a significant potential of growth. It is expected that if the management of the company will buy the company then the management could realize their investment within short time as the company is generating positive cash flows.

Currently, there are 9FT’s in the organization including two owners. Hence, 8 employees excluding the owner could buy the company and it is expected that management of the company has significant available cash in order to buy the company.

Sell the company

The owner of the company also has the option to sell the company to an outside buyer but this option is suitable in that scenario when the management of the company has clear plan to sell the business from the inception of the business. Big Mama had setup the business and created brand value in order to expand the business, therefore this option is not suitable at all............

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