Parmalat S.p.A.: An impressive milking system
In December 2003 Parmalat SpA collapsed into unexpected bankruptcy. Its off-balance sheet debts were later revealed to total €14.3 billion, and it was discovered that it had allegedly been falsifying its accounts and profits for a period of over 10 years. This case details the history of the company and Calisto Tanzi, the entrepreneur who founded it. It also describes the development to date of Parmalat’s “Extraordinary Administration”, the restructuring of the company under the Italian equivalent of “Chapter 11” insolvency. The immediate case issue is how Parmalat disguised its financial problems for so long. Examining this allows several broader issues to be explored, including: 1) when and why Parmalat’s financial problems started; 2) how far Parmalat’s strategy contributed to its problems; 3) the impact changing external environments (political and economic) had on Parmalat’s problems; 4) the effect of Parmalat’s history and origins as a family company on the way it managed its problems; 5) how such large accounting mis-statements could be perpetrated; 6) how those mis-statements could go undetected by investors, bankers and regulators; 7) what red flags and warning signals could have alerted outsiders to Parmalat’s problems.
December 2003
Cranfield University
Wharley End Beds MK43 0JR, UK
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Harvard Business School Publishing
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NUCB Business School
1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
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