Parmalat - The Fall of a Dairy Giant

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Case Details:

Case Code : FINC028
Case Length : 14 Pages
Period : 2003 - 2004
Pub. Date : 2004
Teaching Note : Available
Organization : Parmalat Finanziaria SpA
Industry : Dairy Products
Countries : Italy

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The Italian Angle

Analysts said that the important reason why Parmalat was able to carry on with its fraud for so many years was because of the peculiar features of the Italian business environment.

In Italy, most of the large businesses, although they were public companies, were essentially controlled by families.

This ensured that all the important matters were kept within the family and not revealed to the public. This gave more scope for frauds of the nature of Parmalat. For instance, it was very difficult for investigators in the Parmalat case to separate the funds that went from Parmalat to the company's subsidiaries and those that went to Tanzi's family businesses. Analysts said the Italian idea of corporate governance was very different from that of the rest of the world, and that most of the business transactions were shrouded in secrecy...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

The Road Ahead - Can Parmalat Survive?

Many people in Italy and other parts of the world were surprised by the fact that Tanzi's company could be involved in a scandal. Tanzi was well-known in Italy as a devout and sober person.

He was a regular churchgoer and he and his family were never ostentatious in the display of their wealth.

However, if the charges against Tanzi were proved after the case went on trial, he faced 15 years in jail, which was the term awarded for fraudulent bankruptcy. It was estimated that Parmalat owed between €10 million and €13 million to creditors, including banks and bondholders. Analysts said that it was up to Bondi to unravel the finances of the company and honor its debt payments. However people feared that Bondi would give priority to banks over bond holders, as he was appointed by them and represented their interests...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies


Exhibit I: Parmalat's Major Divisons
Exhibit II: Annual Financials
Exhibit III: Balance Sheet

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