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Hollate Manufacturing

Case Study

Relating to this case study:

This situatio study was created as a joint effort by the Center pertaining to Audit Top quality, Financial Management International, The Institute of Internal Auditors, and the Countrywide Association of Corporate Administrators. These four organizations include formed the Anti-Fraud Cooperation to actively engage in attempts to mitigate the risks of financial reporting fraudulence. The Collaboration's goal is usually to promote the deterrence and detection of economic reporting fraudulence through the advancement education, applications, tools and also other related resources. For more information regarding the Anti-Fraud Collaboration as well as resources much more www.AntiFraudCollaboration.org.

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Jack Brennahan had his dream work. He had always wished for to head a manufacturing company and five years before he received that prospect at Hollate when he was promoted from your CFO position. He loved the work, fantastic environment he previously helped generate, and the people around him. As CEO, however , Brennahan understood the fact that buck stopped with him. He required his responsibilities seriously in running a good business and ensuring that the company met almost all regulatory requirements and ethical expectations of being a good business citizen. He never desired to be ashamed of anything he read inside the newspaper regarding Hollate. Brennahan, however , experienced just received a call from Cara Porcini, Hollate's external auditor, implemented immediately with a call coming from Mike Soltany, Hollate's review committee seat. They had media that ended him cold.

Hollate

Hollate began making products for the home

construction market in the 1950s. For the majority of of their

history it comprised 1 division that made windows

and entry doors for the Southeastern location of the Usa

States. These products were distributed under a number of privatelabel and store brands. Seven years earlier, 2 yrs before Brennahan became CEO, Hollate acquired

a Midwestern door and window producer that as well

had a section that built roofing items. The purchase

enabled Hollate to gain access to new geographic and

product market segments, and also gain economies of scale in

management in addition to raw materials purchasing. Subsequent

this acquisition, Hollate held an initial open public offering

(IPO) and became a public company. Hollate used

proceeds from the IPO to acquire a manufacturer of

home siding products, a manufacturer of prefabricated

outdoor sheds and abri, and two other smaller sized home

construction product businesses.

In recent years a downturn inside the housing sector

impacted the entire home development industry,

including the manufactured items segment. Hollate

had taken a hit in both the revenue development and revenue

margins, nevertheless overall it had fared a lot better than its colleagues.

In hindsight, Hollate may have overpaid for that first

acquisition which acquired occurred before the downturn.

The subsequent purchases, however , were made on

favorable terms because they came after the early days of the

downturn acquired driven over the valuations of numerous

manufacturers.

Hollate now got 14 categories throughout the U. S. and

Canada. Completely 2, 100 employees, revenue of $1 billion,

profit margins consistent with historical industry norms,

and a market capitalization of approximately $1. 5 billion.

With one or two exceptions, every single division was profitable

and was keeping market share.

CEO Jack Brennahan and the

Supervision Team

Brennahan had joined Hollate ten years earlier since CFO

following working his way through several supervision

positions and promotions for two additional firms. Although his

backdrop was in fund and accounting, he always

considered himself a general director. As CFO, Brennahan

had played a respected role in integrating Hollate's first

buy and which makes it a success the two operationally

and financially. He also played out a leading function in acquiring

Hollate open public and determining its various other acquisitions.

If the previous CEO retired,...

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