John Preston

By Jim Ellis, Katherine Rudolph Bose
2013 | Case No. E487 | Length 14 pgs.
For the last year, Mountain Hardware (MH), a leading hardware retailer in the Rocky Mountain region, had evaded bankruptcy and liquidation. The week prior, John Preston, the company’s CEO, learned that the acquisition offers he had expected to receive from four major companies in the industry would be delayed by several weeks. While disappointed with the wait, Preston had held out hope that his shareholders could recover some portion of their $20 million investment by selling the company. Those hopes were challenged when Preston received a call from Mountain Hardware’s loan officer at Bank of the West. It seemed the business’ slumping financial performance had left the company in technical default on its loan covenants and the bank wanted Mountain Hardware to pay down a sizable portion of its loan balance—far more than it could afford—to put the company back in compliance. This was the backdrop against which Preston faced a painful layoff of some of his company’s highest profile employees going into the holiday season.

Learning Objective

This case presents students with a series of challenging situations faced by the CEO as he tries to keep Mountain Hardware alive in the midst of severe economic hardship. Preston must face resistance from his management team in response to a bonus plan incenting them to stay with the company through the turmoil, from vendors as he asks for a six-month runway to pay their bills, delays from potential acquirers, and finally the decision of whether to leave all the chaos behind to take an attractive job offer. Ultimately, students are asked to evaluate a series of difficult decisions, all of which require tradeoffs in the interest of keeping the company afloat.
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