Scanlon Technologies, Inc. * Anne Scanlon founded Scanlon Technologies, Inc., in 1993. The company designed and manufactured high-tech products that were used in various industries ranging from semiconductor to aviation. Over the years, Scanlon Technologies reported a compound annual growth rate in revenues of over 20% due to high demand for the company’s products and Anne’s superior management skills. By the end of 1996, it was clear that any further growth would have to come from international expansion. However, establishing manufacturing operations and opening up sales and marketing offices abroad required a significant amount of capital. Anne considered investing more of her own money into the business; however, given that she already had most of her wealth tied up in the company, she decided against the idea. Moreover, she believed that the amount of funds Scanlon Technologies needed to raise for expansion was in the tens of millions. In her mind, there was only one clear solution—go public. In September 1996, Anne hired J.P. Suisse, a top tier investment bank, to take Scanlon Technologies public. On January 1, 1997, the company, which was authorized by the State of Delaware to sell 20 million common stock and 10 million preferred stock, issued one million shares of common stock in an Initial Public Offering (IPO) and began trading on the New York Stock Exchange under the ticker symbol STI. The stock, which had a par value of $1, was sold for $20 per share and climbed to $26 a share by the end of its first trading day. As expected, the funds raised in the IPO were used to open offices all over the world as well as build a second manufacturing plant in Toronto, Canada. Over the next couple of years, business was good and the company was able to generate enough cash to maintain its level of operations. In October 1999, Anne learned that Kadehjian Solution s Coporation, a competitor, was considering the option of being acquired. Anne believed that such an acquisition would position Scanlon Technologies as the industry leader. One of Kadehjian’s requirements for such an acquisition was that it be an all-cash transaction. Anne knew that this would require Scanlon Technologies to raise approximately $7 million. Ann contracted J.P. Suisse to discuss raising these funds through the capital markets. The managing directors at J.P. Suisse recommended that Scanlon Technologies employ a combination of debt and equity securities. Anne agreed and on January 1, 2000, the company issued an additional one hundred thousand shares of its $1 par value common stock at $40 per share. On the same day, the company issued $2 million in bonds at 95.8, due in 5 years with 5% interest payable annually (at year end). The market interest rate at the time was 6% per year. Also on January 1, 2000, Scanlon Technologies issued $1.3 million in zero-coupon (i.e. no interest) convertible bonds, also due in 5 years. Each $1,000 bond converted into 20 shares of its commo.

1. Scanlon Technologies, Inc.
*
Anne Scanlon founded Scanlon Technologies, Inc., in 1993. The
company designed and manufactured high-tech products that
were used in various industries ranging from semiconductor to
aviation. Over the years, Scanlon Technologies reported a
compound annual growth rate in revenues of over 20% due to
high demand for the company’s products and Anne’s superior
management skills. By the end of 1996, it was clear that any
further growth would have to come from international
expansion. However, establishing manufacturing operations and
opening up sales and marketing offices abroad required a
significant amount of capital. Anne considered investing more
of her own money into the business; however, given that she
already had most of her wealth tied up in the company, she
decided against the idea. Moreover, she believed that the
amount of funds Scanlon Technologies needed to raise for
expansion was in the tens of millions. In her mind, there was
only one clear solution—go public.
In September 1996, Anne hired J.P. Suisse, a top tier investment
bank, to take Scanlon Technologies public. On January 1, 1997,
the company, which was authorized by the State of Delaware to
sell 20 million common stock and 10 million preferred stock,
issued one million shares of common stock in an Initial Public
Offering (IPO) and began trading on the New York Stock
Exchange under the ticker symbol STI. The stock, which had a
par value of $1, was sold for $20 per share and climbed to $26 a
share by the end of its first trading day.
As expected, the funds raised in the IPO were used to open
offices all over the world as well as build a second
manufacturing plant in Toronto, Canada. Over the next couple
of years, business was good and the company was able to
generate enough cash to maintain its level of operations.
In October 1999, Anne learned that Kadehjian

2. Solution
s Coporation, a competitor, was considering the option of being
acquired. Anne believed that such an acquisition would position
Scanlon Technologies as the industry leader. One of
Kadehjian’s requirements for such an acquisition was that it be
an all-cash transaction. Anne knew that this would require
Scanlon Technologies to raise approximately $7 million.
Ann contracted J.P. Suisse to discuss raising these funds
through the capital markets. The managing directors at J.P.
Suisse recommended that Scanlon Technologies employ a
combination of debt and equity securities. Anne agreed and on
January 1, 2000, the company issued an additional one hundred
thousand shares of its $1 par value common stock at $40 per
share. On the same day, the company issued $2 million in bonds
at 95.8, due in 5 years with 5% interest payable annually (at
year end). The market interest rate at the time was 6% per year.
Also on January 1, 2000, Scanlon Technologies issued $1.3
million in zero-coupon (i.e. no interest) convertible bonds, also
due in 5 years. Each $1,000 bond converted into 20 shares of its
common stock at any time during the five-year period. The
convertible bonds were sold for a total of $1,100,000.
*

3. (Copyright © by the President and Fellows of Harvard College.
Harvard Business School case 190-017)
2
On March 2, 2000, Scanlon Technologies acquired Kadehjian