Other People's Money

 

It tells the struggle between Larry the Liquidator (Danny Devito), the Manhattan-based predator, and Jorgesen (Gregory Peck in his final feature film role), the salt-of-the-earth president of New England Wire & Cable. Larry, who already owns a chunk of the company’s stock, decides that it’s undervalued. The way to make a killing is to get rid of the wire & cable division, which is running at a loss, and keep everything else. Jorgesen, defending the livelihood of his employees, won’t hear of it. Undaunted, Larry starts the proceedings that will lead to a hostile takeover. Jorgesen brings on board his daughter Kate, a high-priced New York lawyer, to defend his company. She visits Larry and turns on the charm. He is smitten but being in love isn’t enough to derail his business interests. 

Most importantly, we have the clash of two men whose worldviews could not be more opposite—the sentimental communitarian Jorgesen, and Larry, the cunning but mildly conscientious capitalist. Jorgesen cannot understand how the stockholders could be disloyal, tossing aside tradition and friendship to vote for a stranger who can only offer them more money. He had been confident that his fellow shareholders would support his slate during the proxy fight where eventually despite all the pleas human being human took up that survival and love of money are top priorities. 

One of vehement speeches I have come across in a movie and has always been a referred case of what happens when a traditional corporation such as NEWC is unable and/or unwilling to react to an external threat in the form of a corporate takeover attempt made by a modern organization of the future (Garfinkle Investment Corporation). With no debt, NEWC had an inefficient capital structure. If NEWC had issued a substantial amount of debt to leverage the company, it would not have been as attractive to a takeover artist. NEWC had a lot of cash, many liquid assets, a fully-funded pension plan, and a debt-to-equity ratio of zero. 

Of course, financial leverage, the degree to which a firm uses borrowed funds, is a two-way street. There can be too little or too much financial leverage. When the debt-to-equity ratio goes up to a certain number, investor confidence in the company is apt to drop sharply.

🔸🔸🔸🔸🔸🔸🔸🔸🔸🔸🔸🔸🔸