Hydrofruit case analysis

Jennifer Nguyen

BUAD 301 SAT 7-945 am

October 19, 2016

HydroFruit, Inc. Case Analysis

Judson Dillon works for MegaBank, one of the world’s largest financial institution. He is contemplating on finalizing a $65 million equity investment deal with HydroFruit, Inc., the world’s largest tomato greenhouse. Recently, there has been a controversy over hiring illegal immigrants to work. The U.S. Congress has been debating on an immigration reform, which can cause many businesses that hire illegals to be fined. HydroFruit’s is located just 100 miles from the border, which raises Dillon’s suspicion about the company hiring illegal immigrant workers.

Objective: Dillon’s objective is to choose a decision that will be the most beneficial to Megabank in the short and long run.

Significance of the Problem: Illegal immigration can be beneficial or harmful

Illegal immigration can be beneficial in the following ways:

· Illegal labor in the U.S. will help out many Latin Americans economically.

· Illegal immigrants are willing to do jobs in the U.S. that most Americans are not willing to do anymore.

· The U.S. will receive cheap and reliable labor from illegal immigrants

Illegal immigration can be harmful in the following ways:

· It is possible for illegal immigrants to be smuggling drugs or weapons into the U.S.

· Less jobs will be offered to Americans because illegal immigrants are willing to work for less.

· Unfair to those immigrants who had to go through a legal process to become a legal citizen.

· It is against the law.

Alternative 1: To finalize the investment.

Five out of his six team members agree that finalizing the investment is the best choice. There are a few advantages to finalizing the investment. Megabank would gain $65 million from Hydrofruit. Hydrofruit is currently complying with all the minimum legal requirements. They participated in a program called the 1986 Immigration Reform and Control Act (IRCA), which allows employees to check the accuracy of information provided by potential employees. According to Hydrofruit’s lawyers, the participation in IRCA can possible help protect the company from prosecution if there was an investigation about illegal immigrant workers at their company. This helps reduce upcoming problems for Dillon and Megabank. There are a few potential problems with finalizing this investment. If Hydrofruit were to be guilty for immigration violations by the U.S. Department of Justice in the future, Dillon would have to go through many troubles. He would have to pay a $250 fine per infraction. Also, if Hydrofruit were to hire an illegal immigrant whom could have helped smuggle drugs or weapons across the border, this can cause major problems with the law for the company. If immigration reform laws pass and Dillon had already invested in Hydrofuit, all illegal immigrant workers will not be able to work anymore for Hydrofruit. This means that there will be a lack of workers which leads to a lack of production for the company. This will cause the company to lose many profits. Dillon will have to go through the troubles of hiring new workers and paying them at a higher wage than the illegal immigrant workers.

Alternative 2: To back out of the investment.

One out of his six team members thinks that Dillon and Megabank should not invest in Hydrofruit because the risk is too high. This decision is the safest decision for Megabank and Dillon, but the least rewarding because they will lose a $65 million investment. The advantages of this decision is that Dillon will not have to run into any troubles with the law and pay massive amounts of fines and fees for having illegal immigrant workers. Another advantage is that, it is pretty certain that Hydrofruit hires illegal immigrants because the CFO of Hydrofruit stated, “Without illegals, our industry stops dead”. This is suspicious enough that this firm hires illegal immigrants just like other firms that have been caught hiring illegal immigrants as well. This means that if Dillon backs out, then in the future there is no possible chance that Megabank will be in the media for investing in a company that hires illegal workers. Dillon and Megabank will most likely run into another business in the future that they will able to invest as much or even more in. The only disadvantage of backing out is losing that $65 million equity investment for Megabank.

Conclusion and Recommendation:

If Dillon’s objective is to choose a decision to be the most beneficial to Megabank, then he should not invest in Hydrofruit. There are too many risks in investing into a company that may be hiring illegal immigrants to work. It is a safer decision for Megabank and Dillon in the short and long run. It may be a less rewarding decision, but it is better to play it safe than to lose the entire company over immigrant workers.

It is recommended that Dillon continue to find other investments that does not require Megabank to be involved with anything that is illegal.