Despite Disturbing Discoveries During Due Diligence, Mattel Acquired the Learning

question 131

Essay

Despite disturbing discoveries during due diligence, Mattel acquired The Learning Company (TLC), a leading
developer of software for toys, in a stock-for-stock transaction valued at $3.5 billion on May 13, 1999. Mattel had determined that TLC's receivables were overstated because product returns from distributors were not deducted from receivables and its allowance for bad debt was inadequate. A $50 million licensing deal also had been prematurely put on the balance sheet. Finally, TLC's brands were becoming outdated. TLC had substantially exaggerated the amount of money put into research and development for new software products. Nevertheless, driven by the appeal of rapidly becoming a big player in the children's software market, Mattel closed on the transaction aware that TLC's cash flows were overstated. Despite being aware of extensive problems, Mattel proceeded to acquire The Learning Company. Why? What could Mattel to better protect its interests? Be specific.

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Definitions:

Conflict Between Parents

A situation where there is disagreement or discord between mother and father, which can affect family dynamics and emotional wellbeing of children.

Cohabiting-parent Family

A family structure where the parents are living together without being married, involving shared responsibilities of raising children and managing household tasks.

Perceived Control

An individual's belief in their ability to influence events and outcomes in their lives.

Self-Confidence

A feeling of trust in one’s abilities, qualities, and judgment.