“What is a business worth?” For Larry the liquidator (played by Danny DeVito) a business is worth the price of its stock, for Jorgy, the entrepreneur who inherited the New England Wire and Cable Company from his father, a business is about the people associated with it. The tension between these two perspectives- The shareholder view of financial economics and the stakeholder view of management- provides the basic story for the movie Other People’s Money (1991). Larry the liquidator is always on the lookout for good companies that he can buy and sell to make a profit. One day he comes across a small firm New England Wire and Cable Company that was ably managed by the second-generation of the founding family and was completely debt-free. When Larry’s offer to buy the company is refused by the owners, he pursues a hostile take-over. Larry’s attempts for the hostile takeover are repeatedly stalled by Kate, the step-daughter of Jorgy. Finally, the shareholders are asked to vote on whether they want to keep the company private and retain the existing management, or are willing to let Larry acquire the company so he could sell it and make a good profit for the shareholders. (You can check out a more detailed summary of the movie here.)
The movie is a romantic-comedy. It does a good job of presenting hostile takeovers and corporate acquisitions in a fun way. Companies, big and small, can be attractive targets for takeover and acquisition for a variety of reasons. The movie effectively portrays how a company which is apparently being run well (i.e. the management is honest and caring and the company is completely debt free) may be attractive to corporate raiders who can help shareholders get a better return for their money. The management of the company, like Jorgy in the movie, try their best to defend against these attacks using a number of tactics. The recent Microsoft-Yahoo story relates well to the movie. Microsoft made an offer to acquire Yahoo, but Jerry Yang the founder CEO of yahoo did not want to sell his company. He was able to stall the offer for a while, force Microsoft to make a better offer, and convince his board to finally reject the offer. However, as is well known, Yahoo’s problems are far from over. If the management of Yahoo is not able to come up with a plan to strategically redefine and reposition Yahoo soon (as Jorgy’s step-daughter was able to do in the movie), the days of Yahoo as an independent company may very well be numbered.
The movie is certainly worth watching, especially for students and instructors interested in topics related to corporate strategy, acquisition, diversification, takeovers, and entrepreneurship.