Case Study: Conseco
Imagine a multi-billion dollar company with a vision to be a full-service investments firm. The firm acquires a company in hopes of increasing the bottom line; however, the acquisition only places tremendous resource burdens on the company.
This scenario became a reality for Conseco, a leading source of insurance, investment and lending products. In 1998, Conseco purchased Green Tree Financial Corporation (Green Tree), a company providing various financial services. Conseco had intended for Green Tree would to propel it into a market leadership position; however, the exact opposite occurred.
This essay will provide an overview of Conseco, a situational analysis, a problem analysis including analysis of each business function, recommendations for the company, and a plan for implementing the proposed recommendations. The essay will focus on the acquisition of Green Tree and the subsequent implementation of a web-based cash management system.
Conseco services the extensive financial marketplace concentrating on the areas of insurance/risk management, investments and consumer finance/lending. These vast product offerings provided Conseco with a healthy revenue stream and a leadership position in the marketplace.
In 2001, the company had nearly $95 billion in managed assets, employed nearly 14,500 people and serviced 13 million customers. The company was financially sound throughout the 1980’s and 1990’s as annual returns continually increased. The company was hailed as a “great entrepreneurial success story.”
The soundness of Conseco would soon come to an end as the company continued to grow and amass assets, including Green Tree in 1998. Green Tree was a finance company that primarily offered services with regard to homes and private label credit cards. Conseco hoped Green Tree would fill several gaps in the company’s product lines, en route to realizing their vision of being a full service financial institution.
Green Tree was a natural fit for Conseco due to both companies targeting the same market of American consumers with incomes between $25,000 and $75,000. Conseco was also interested in Green Tree’s substantial customer database, which would allow for cross-promotions and cross selling. Executives believed this was an excellent avenue to increase customer bases for both companies and ultimately, increase profits.
Conseco purchased Green Tree for approximately $6 billion. Many investors speculated that the acquisition would place substantial burdens on the company, including financial and human resources. In addition to the initial doubt of the success of the acquisition, several external factors, such as a downturn in the economy and Russia’s economic crisis, caused investors to doubt Conseco’s ability to turn a profit with Green Tree.
This assumption would prove true, as Green Tree would drain more revenues than it...