Abstract: The Day the Music Died: Rooney, Pace and the Hostile Takeover of the Norlin Corporation

John F. Uggen


The hostile takeover of the Norlin Corporation by Rooney, Pace is representative of the negative side of the merger and acquisition mania of the 1980s. Norlin was founded in 1913 as the Ecuadorian Corporation, a holding company for a brewery, cement plant, and other enterprises in Ecuador. In 1962 Hope Norton Stevens assumed the presidency and made the fateful decision to seek more profitable business opportunities in the United States. Between 1962 and 1966 the company acquired several electronics companies. In 1969 the Chicago Musical Instrument Company was acquired, and Norlin became the largest manufacturer of musical instruments in the United States. The early 1970s saw spectacular growth in the music business, but the 1975 recession forced the corporation to sell off both its remaining operations in Ecuador and its electronics units. In explaining the reasons for Norlin's takeover I emphasize the decision to acquire new lines of business for which Norlin's management lacked experience, the large amount of cash realized in the sale of Norlin's assets, its declining price-earnings ratio, and other factors. Finally, I analyze the unsuccessful defensive strategies employed by Norlin's management to block the hostile takeover by Rooney, Pace.

BEH On-Line Paper