Problem
Creative Crafts, Inc. (Creative), a small yet highly profitable company, has approached Crafts, Inc. (Crafts) to determine whether Crafts is interested in acquiring it. Crafts and Creative are non-public companies. Crafts is about 10 times the size (in terms of capitalization) of Creative and observes the best practices of corporate governance, whereas Creative is a small operation of five persons and has been in existence for less than one-quarter of the time Crafts has existed. Crafts has never purchased a small business, and a long time has elapsed since Crafts was a small operation; as a result, the CEO of Crafts, Jim Dunbar, is asking your advice about what it should be aware of with respect to this company.