Honeywell Buys Measurex - Debt Equity Choice

This mini-case focuses on the use of debt to finance Honeywell's acquisition of Measurex in 1997. The financing appeared surprising because the stock market was booming, and Honeywell's investment bankers were urging it to use equity. The case affords the opportunity to explore the debt-equity choice, without having to get bogged down in numbers. It is intended as a vehicle to discuss the conceptual issues involved in capital structure.

Although the case can be used with advanced undergraduate and MBA classes, it is designed with executive audiences in mind. It is designed to be used in seminars on value based management and economic value added as a means of introducing some of the faulty logic that often goes into capital structure decisions.