BWIP's Acquisition of Pacific Wietz
In late 1993 BWIP, a U.S.-based firm specializing in the manufacture, distribution, and sales of advanced fluid transfer and control equipment, is in the final stages of an acquisition. The company has reached agreement with the owners of a German company, Pacific Wietz, to purchase the firm for $24 million. Pacific Wietz held the patent rights to a highly specialized dry gas seal used in the compressor market. BWIP now needed to determine how to structure the acquisition in terms of form, ownership, and finally financing.
This case is a classic "board case;" the complexity of issues, goals and accounting-finance-tax combinations allow the instructor to use student input in constructing visual-paths and scenarios of alternative acquisition structures. The three primary areas addressed by the case are: 1. accounting dimensions of alternative acquisition forms; 2. international tax planning implications in the structuring of a foreign acquisition; and 3. the choice of debt as instrumental in tax implications for managing the foreign tax credit position of a U.S.-based multinational firm.