SITUATION 2 Ed and Barbara Bonneau started their wholesale sunglass distribution firm 30 years ago with $1,000 of their own money and $5,000 borrowed from a country banker in Ed’s hometown. The firm grew quickly, selling sunglasses and reading glasses to such companies as Wal-Mart, Eckerd Drugs, and Phar-Mor. In addition, the Bonneaus enjoyed using the company to do good things. For example, they had a company chaplain, who was available when employees were having family problems, such as a death in the family. Although the company had done well, the market had matured recently and profit margins narrowed significantly. Wal-Mart, for example, was insisting on better terms, which meant significantly lower profits for the Bonneaus. Previously, Ed had set the prices that he needed to make a good return on his investment. Now, the buyers had consolidated, and they had the power. Ed didn’t enjoy running the company as much as he had in the past, and he was finding greater pleasure in other activities; for instance, he served on a local hospital board and was actively involved in church activities. Just as Ed and Barbara began to think about selling the company, they were contacted by a financial buyer, who wanted to use their firm as a platform and then buy up several sunglass companies. After negotiations, the Bonneaus sold their firm for about $20 million. In addition, Ed received a retainer fee for serving as a consultant to the buyer. Also, the Bonneaus’ son-in-law who was part of the company’s management team, was named the new chief operating officer.

Question 1 Do you agree with the Bonneaus’ decision to sell? Why or why not?

Question 2 Why did the buyers retain Ed as a consultant? (In answering this question, you might consider the quote by Bonneau in the chapter.)

Question 3 Do you see any problem with having the Bonneaus’ son-in-law become the new chief operating officer?

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