Description
Newell Rubbermaid Case Analysis
Newell Rubbermaid
Global marketer of commercial and consumer products ? S&P 500 company ? Revenues: 5.9 billion in 2011
?
Vision
To be a global company of ‘Brands that Matter’ and great people known for best in class results
Strengthening Strengthening financial Expanding in performance culture to drive new top-line, key global bottom-line markets organizational capabilities and gross margins
Accelerating growth consumer driven innovation
Background – Phase 1
1903
• Created in 1903 by the acquisition of curtain rods manufacturer by Edgar Newell • Build relationships with Woolworth company – paving way for company’s mass merchandising strategy • First acquisition of Barnwell Mfg. Co. and renamed to Western Newell
1912
1921
Background – Phase 2
1965
• Dan Ferguson named President who crafted the growth-by-acquisition strategy • Company enters cookware market with purchase of Mirro, Wear Ever and REMA
1983
1987
• Acquisition of Anchor Hocking
• Acquisition of W.T Rogers, Sanford, Levelor, Goody, Kirsch, Rolodex, Calphalon, 1990’s Rubbermaid and others
Background – Phase 3 – Consumer Driven Branding Organization CEO • Mark Ketchum named
2005
• Transformation of business model – consumer driven innovation, branding and marketing • ‘Brands that Matter’
2008-11
• Acquisition of Technical Concepts, Aprica Kassai, Bebe Sounds, Headsprout
Key Segments
Newell Consumer
Rubbermaid Levelor Calphalon Paper Mate
Newell Professional
Irwin Lenox Rubbermaid
Baby and Parenting Essentials
Graco
Aprica
Goodie Parker
Dymo
Shur Line Teutoni a
“Newellization” – Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company.
Newellization Process
Acquire companies that met ‘Newell criteria’ Quickly compare Income Statements Recognize cost structure problems Find ways to reduce costs Raise Operating Margins above 15%
Acquisition Strategy
Criteria for Selection of companies ? It manufactured low technology, non seasonal, noncyclical, non fashionable products ? Underperforming due to high cost ? On the shelf products ? Operating margin less that 10 %
Acquisition Strategy
Growth by Acquisition
Transition cycle: ? Newellization took 6 – 18 months ? Led by brought-in president and controller ? Focusing acquired business strictly on its core competencies ? Centralize responsibilities: ? Centralize Accounting system ? Expenditures Approval ? Cash management, A/R, A/P ? Order processing ? Data processing operations
?
Acquisition Strategy
? Enhancing efficiency
? Eliminate non-productive lines ? Reduce inventories ? Increase A/R turnover ? Extend A/P terms ? Trim excess costs
CALPHALON Acquisition Difference in the Strategies
NEWELL Sells high volume products to mass retailers Existing cookware products in the good, better and best category CALPHALON Sells high end cookware in department and specialty stores in low volume Manufactured high quality aluminum cookware for the food service industry
Newellization keeps the brand name of the target firm and discards the existing people and processe
Calphalon has built its brand equity, in large part, because of the efforts of its sales force and its focus on educating retailers and end users on the product.
Focused on customer relationships and establishing an emotional connection with the consumer
Focused on the volume and acquiring shelf space through its acquisitions
BCG Matrix
BENEFIT AND FEEL
Creates value for Newell by extending its reach into the non-mass merchandise market. By acquiring a company that has core competencies in the high end retail segment, Newell is branching out into non-saturated markets where products haven?t reached critical mass.
Newell can apply its capabilities of “Newellization” to control Calphalon?s increasing COGS and high SG&A (36%) expenses
Newell can look to leverage this capability across its divisions to differentiate its product portfolio and protect its market share from low cost competitors.
Rubbermaid Acquisition–Right is it ?
Rubbermaid was one of the most admired Fortune 500 companies ? Blue-chip firm with long legacy of innovation and smart marketing ? Both Newell and Rubbermaid sold household products through same sales channels ? Exclusive right given to Newell to acquire the company
?
“Merger from Hell” Businessweek
Newell - write off 500 million in 2002 ? Loss Shareholders – Newell – 50%, Rubbermaid – 35% ? Both companies had very different operating structures – different value propositions to customers
?
What went wrong Rubbermaid
Wrong Choice
Different operating structures
Not enough Research
Rubbermaid acquisition – largest ever for Newell
Newelize
Newell went for broad approach to integrating Rubbermaid
Different customer propositions
Just 3 weeks weren?t enough to judge the deal
Within 2 years the integration had failed to give new sales
Newell – low cost production, Rubbermaid – brand driven company
Rubbermaid health was not as good as was seen on paper – operating problems Fergusson – „we should have paid $31 a share but we paid $38?
Cost savings of $230 million as predicted $300 million
Parental Developer
Acc. to the Ashbridge Portfolio, Newell perceived there was high feel and benefit associated with Rubbermaid business. ? Newell?s leaders were of the opinion that Rubbermaid?s weaknesses in terms of operating inefficiencies would be solved by Newellization ? Thus this acquisition was made with the perceiving it to be a heartland
?
Parenting Matrix
Ballast Business Heartland Businesses (Rubbermaid – as perceived by Newell prior to acquisition) Alien Business Value Trap Business (What Rubbermaid actually was)
Fe el
Benefit
Thank You
doc_567296536.pptx
Newell Rubbermaid Case Analysis
Newell Rubbermaid
Global marketer of commercial and consumer products ? S&P 500 company ? Revenues: 5.9 billion in 2011
?
Vision
To be a global company of ‘Brands that Matter’ and great people known for best in class results
Strengthening Strengthening financial Expanding in performance culture to drive new top-line, key global bottom-line markets organizational capabilities and gross margins
Accelerating growth consumer driven innovation
Background – Phase 1
1903
• Created in 1903 by the acquisition of curtain rods manufacturer by Edgar Newell • Build relationships with Woolworth company – paving way for company’s mass merchandising strategy • First acquisition of Barnwell Mfg. Co. and renamed to Western Newell
1912
1921
Background – Phase 2
1965
• Dan Ferguson named President who crafted the growth-by-acquisition strategy • Company enters cookware market with purchase of Mirro, Wear Ever and REMA
1983
1987
• Acquisition of Anchor Hocking
• Acquisition of W.T Rogers, Sanford, Levelor, Goody, Kirsch, Rolodex, Calphalon, 1990’s Rubbermaid and others
Background – Phase 3 – Consumer Driven Branding Organization CEO • Mark Ketchum named
2005
• Transformation of business model – consumer driven innovation, branding and marketing • ‘Brands that Matter’
2008-11
• Acquisition of Technical Concepts, Aprica Kassai, Bebe Sounds, Headsprout
Key Segments
Newell Consumer
Rubbermaid Levelor Calphalon Paper Mate
Newell Professional
Irwin Lenox Rubbermaid
Baby and Parenting Essentials
Graco
Aprica
Goodie Parker
Dymo
Shur Line Teutoni a
“Newellization” – Well-established profit improvement and productivity enhancement process that is applied to integrate newly acquired product lines to the parent company.
Newellization Process
Acquire companies that met ‘Newell criteria’ Quickly compare Income Statements Recognize cost structure problems Find ways to reduce costs Raise Operating Margins above 15%
Acquisition Strategy
Criteria for Selection of companies ? It manufactured low technology, non seasonal, noncyclical, non fashionable products ? Underperforming due to high cost ? On the shelf products ? Operating margin less that 10 %
Acquisition Strategy
Growth by Acquisition
Transition cycle: ? Newellization took 6 – 18 months ? Led by brought-in president and controller ? Focusing acquired business strictly on its core competencies ? Centralize responsibilities: ? Centralize Accounting system ? Expenditures Approval ? Cash management, A/R, A/P ? Order processing ? Data processing operations
?
Acquisition Strategy
? Enhancing efficiency
? Eliminate non-productive lines ? Reduce inventories ? Increase A/R turnover ? Extend A/P terms ? Trim excess costs
CALPHALON Acquisition Difference in the Strategies
NEWELL Sells high volume products to mass retailers Existing cookware products in the good, better and best category CALPHALON Sells high end cookware in department and specialty stores in low volume Manufactured high quality aluminum cookware for the food service industry
Newellization keeps the brand name of the target firm and discards the existing people and processe
Calphalon has built its brand equity, in large part, because of the efforts of its sales force and its focus on educating retailers and end users on the product.
Focused on customer relationships and establishing an emotional connection with the consumer
Focused on the volume and acquiring shelf space through its acquisitions
BCG Matrix
BENEFIT AND FEEL
Creates value for Newell by extending its reach into the non-mass merchandise market. By acquiring a company that has core competencies in the high end retail segment, Newell is branching out into non-saturated markets where products haven?t reached critical mass.
Newell can apply its capabilities of “Newellization” to control Calphalon?s increasing COGS and high SG&A (36%) expenses
Newell can look to leverage this capability across its divisions to differentiate its product portfolio and protect its market share from low cost competitors.
Rubbermaid Acquisition–Right is it ?
Rubbermaid was one of the most admired Fortune 500 companies ? Blue-chip firm with long legacy of innovation and smart marketing ? Both Newell and Rubbermaid sold household products through same sales channels ? Exclusive right given to Newell to acquire the company
?
“Merger from Hell” Businessweek
Newell - write off 500 million in 2002 ? Loss Shareholders – Newell – 50%, Rubbermaid – 35% ? Both companies had very different operating structures – different value propositions to customers
?
What went wrong Rubbermaid
Wrong Choice
Different operating structures
Not enough Research
Rubbermaid acquisition – largest ever for Newell
Newelize
Newell went for broad approach to integrating Rubbermaid
Different customer propositions
Just 3 weeks weren?t enough to judge the deal
Within 2 years the integration had failed to give new sales
Newell – low cost production, Rubbermaid – brand driven company
Rubbermaid health was not as good as was seen on paper – operating problems Fergusson – „we should have paid $31 a share but we paid $38?
Cost savings of $230 million as predicted $300 million
Parental Developer
Acc. to the Ashbridge Portfolio, Newell perceived there was high feel and benefit associated with Rubbermaid business. ? Newell?s leaders were of the opinion that Rubbermaid?s weaknesses in terms of operating inefficiencies would be solved by Newellization ? Thus this acquisition was made with the perceiving it to be a heartland
?
Parenting Matrix
Ballast Business Heartland Businesses (Rubbermaid – as perceived by Newell prior to acquisition) Alien Business Value Trap Business (What Rubbermaid actually was)
Fe el
Benefit
Thank You
doc_567296536.pptx