Analysis of Article about EnClean Case Essay

914 Words 4 Pages
This case analyzes situation described in the Harvard Business Review article about EnClean located at:

1. Major issues facing EnClean.

A. Stock price is down more than 85% from its high of $22.

Company has been losing money since the first quarter of 1992. Financial fundamentals are sagging:

· Gross margin is dropping;
· SG&A are too high;
· debt is huge;

As a result, investors have lost confidence in the company.

B. Managerial incompetence. COO has lost control over several major company’s SBUs. Since 1989 EnClean has been failing the task of properly integrating acquired companies. Business units such
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Our desire to grow through acquisitions was so great that we would often undermine our ability to sustain that growth. Our cash flow was always a problem, and our debt-to-equity ratio ranges between the appalling 1,563% (!) in 1986 to still huge 208% in 1992.

We should have limited our acquisitions to the companies within our core competency and to those compatible with our strategies. In our early years, for example, when we bought Maintech International, we negotiated hard to buy their industrial services, but not their specialty chemical operations.

But later on, we went against these principles. For instance, we acquired AlphaTech that was primarily a products distribution company, and therefore, outside of our competency. Another acquisition, Sizemore, did not have expertise in small pond dewatering; therefore we could not leverage its resources for our existing customers.

We should have paid a great deal more attention to leveraging economies of scale, corporate values, and core competencies throughout all acquired companies. In our early years, when we acquired Parkem, we made sure the management transition was smooth, customer base was combined, and we leveraged by cross selling and reduced operational expenses.

However, subsequently, the transition processes got out of control; quality became a formality; we don’t leverage (e.g. we have five accounting systems).

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