Question
Howard Cunningham ran a construction materials company - Cunningham Stone & Gravel. His firm supplied materials such as crushed stone to companies that operated asphalt
Howard Cunningham ran a construction materials company - Cunningham Stone & Gravel. His firm supplied materials such as crushed stone to companies that operated asphalt production plants. Some of those asphalt companies also operated paving subsidiaries - i.e. companies that paved and repaved homeowner driveways and community roads. Howard recognized that he was in a tough business, as many of these materials that he sold were essentially commodities. He had managed to achieve decent profitability over the years by running one of the lowest cost operations in the country. However, he was now considering a plan to expand the business. He had an opportunity to acquire a firm with whom he had done business for years - Fonzarelli Driveways and Walkways. This customer operated a successful paving business known for its high quality work, as well as its willingness to design and implement unique, high end, customized driveway, sidewalk, and patio projects for wealthy homeowners. Fonzarelli Driveways and Walkways also operated several asphalt production plants of its own. The company was profitable, with revenue and profit growth that exceeded Cunningham Stone & Gravel's financial performance.
If you were Howard Cunningham, what issues would you consider before making the final decision about this acquisition?
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