Newell & Rubber Maid

Using the tools that we covered in this course, evaluate the acquisitions of Calphalon and Rubbermaid. Do the acquisitions make sense? Is the purchase price of Rubbermaid justified? How do Calphalon and Rubbermaid fit with Newell’s corporate strategy? Do you believe the acquisitions will be successful? Why or why not?

Please be sure to provide both quantitative and logical support for your arguments using only information from the case.

Answer:

To evaluate Newell’s acquisition of these two companies it is important to know Newell’s history, origination of its strategy and integration process that Newell uses with all its acquisition to create value.

History

Newell was born in 1902 when Edgar Newell saw an opportunity to sell drapery rods to growing suburban demands. Newell’s boundary then was limited to manufacturing curtain rods and selling it to small hardware stores and industrial developers. In 1965 Dan Ferguson became the CEO of Newell. Dan realized that Newell had a limited product range based on curtain rods and no articulated strategy for the future. After a SWOT analysis Newell and the market Ferguson foresaw consolidation of the retail market and envisioned a role of Newell: to make high-volume/low-cost product and to sell this product to large retail institution i.e. “Mass retailer”. This was an important milestone for Newell as its leadership was changing firm’s boundaries, induced by the market opportunities.

Newell acquired more than 30 businesses in 20 years. After acquisition these firms went through process improvements to achieve operational efficiency and profitability known as “Newellization”. All of the newly acquired firms were high-volume/low-cost manufacturers, which allowed Newell to compare their income statements with its own to identify cost-inefficiencies, it would then work on the areas causing most of the overhead to reduce cost. Newell had a strategy to consolidate backend activities of all its businesses to leverage...