1. Why could Bollenbach have opened its offer for ITT at $55 per share? What was his likely strategy? The $55 value is at the lower range of analyst estimates, with a best estimate of $67.94. With the stock's value below $45 for 4 months, the $55 offer represented a 29% premium for investors. Bollenbach knew that management would be reluctant to attempt an acquisition, whatever the price, due to the failure of previous attempts to negotiate a friendly merger in late 1996. $55 has created an expectation for ITT management to reach that level, or higher, and the premium is enough to demonstrate to investors that this is a real deal. Their support will be key as they will have a vote to decide the fate of the poison pill provisions that must be removed to make the deal necessary. As the deal moves forward, Hilton has plenty of room to negotiate with investors because their best The estimated value of ITT's deals is still 20% higher than their initial offer. By starting with a low bid, Hilton may take the risk that another competitor will enter the bidding, but its market analysis does not show such competition for such a large transaction. Since Hilton always has the option to offer a higher offer later and has a 5% stake in the company that would benefit from such competition, Hilton's low offer indicates that they do not are not afraid of such a situation. The initial offer was well received on Wall. Street, but not by ITT's well-established management. In an unlikely scenario, the bidding company's stock price actually rose 10 percent because this acquisition made perfect sense for Hilton. The offer was made in January, when ITT's stock price was around $43.2. Why Bollenbach...... middle of paper ......nt lies In investors, Bollenback should address the impending situation directly to shareholders. It would be important to ensure they know that management's incentives are not necessarily the same as theirs, as demonstrated by the lack of executive ownership at ITT. Investors should be aware of random changes management has made recently in order to improve their stock price. ITT management cited the interests of ITT shareholders and employees as reasons for not accepting the offer, but it recently cut 125 jobs, or more than half of its headquarters. Hilton has a plan to increase shareholder value through better capital structure, improved cash flow and synergistic discounts. Additionally, they should be aware of the decision window of opportunity created by aligning management's end-of-term terms, as well as any other timing issues..