Question

1. Evaluate the acquisition of Calphalon; does it make sense? (cost-benefit) What capabilities/resources of Newell would help/hinder this acquisition?

2. Evaluate the acquisition of Rubbermaid; does it make sense? (cost-benefit) What resources/capabilities of Newell would help/hinder this acquisition?

3. With the challenges that Newell faces, what should Newell's TMT consider/do regarding their corporate strategy? Or what should they be careful about the acquisition of Calphalon and/or Rubbermaid?

Answer 1

1. Pros for Newell from acquisition of Calphalon are: This might help the organization to enter non-mass merchandise market and sell large amount of products with strong brand reputation. Also this acquisition can help the organization to reduce the administrative, general and selling expenses. Some of the other attractiveness are due to:

Cons for Newell from acquisition of Calphalon are: Calphalon products do not bring in anything new to the Newell product line. and thus the acquisition might not contribute to achieving ‘critical mass’. With increasing sales but low profits Newell may not have the requisite capability to turn around their expenses as they do not have experience with department/specialty stores.

Distinctive resources of Newell would help the organization to increase the productivity and improve its profitability by bringing the new acquired businesses up to the high standards of profitability and productivity. With the help of the different approaches such as transfer of the experienced managers into the acquiring company, accounting, centralization of the administrative functions etc. Competitive strategy of Newell applied to the intended and operations for differentiating their mass merchandise customers based on superior services would surely help them.

2. Pros for Newell from acquisition of Rubbermaid are: Their product lines include home storage and commercial products which are high-volume products sold to mass retailers which perfectly aligns with Newell’s core competence coupled with high brand equity and innovative products should be a huge success. Rubbermaid product line can help achieve ‘critical mass’ for Newell in Home Storage segment as well.

Cons for Newell from acquisition of Rubbermaid are: Acquisition might be a long and tedious process that would slow down the investment recovery for Newell. Also some of the product lines, not in line with Newell strategy may have to be sold off to recover investment cost which can optimize their product line or can be a huge market loss which can be a risk.

Distinctive resources of Newell are same as that was for Calphalon.

Thus considering both the pros and cons if the two potential acquisitions, when revenue size is not considered, Rubbermaid seems to be a better acquisition target for Newell than Calphalon according to me as Rubbermaid has considerable brand value and is aligned with formulated company strategy of catering to only mass-retailers.

3. Corporate strategy which Newell can follow are:

Proper administration can create the efficiency by assessing divisional performance in terms of distributing the profitability of the products through the mass retailers. Top management should believe that the acquisition is contributing to the growth of the strategy. Also I believe that, division of this corporation adds value for the business with the portfolio that Newell possesses.

Regarding the acquisition, they should be careful about the cons of both the companies and should select the one that strategically aligns to Newell's strategic growth.