Assignment 2: Newell Company: The Rubbermaid Opportunity



Assignment 2: Newell Company: The Rubbermaid Opportunity

Executive Summary

The case study deals with the possible merger of Newel Company with Rubbermaid Incorporated. The merger agreement would be tax-free exchange of shares. The approximate value of these shares is $5.8 billion. The major product grouping of Newel is Hardware and Home Furnishings, House wares and Office Products, with revenue of approximately $3.7. On the other hand, Rubbermaid Incorporated manufactures the plastic products, such as toys and house wares.

Newel attracted to the merger offer because it could get the benefits of enhanced product line, and global presence. On the other hand, Rubbermaid Incorporated would be able to enjoy the benefits of perfectly aligned operations of the Newel, which were absent in their company.

The paper makes two recommendations, either to merge with Rubbermaid or not. If merging, Newel would have efficiently planned the newellization process (a process used for making the operations and resources of two companies aligned). The main issues Newel would have to address included improvement of customer relationships and alignment of operations.

The recommendation of not merging makes sense for Newel, as the companies should not merge with any company which they find cheap, but they should determine that what the future possibilities are which associate with any merger or acquisition activity (Sudarsanam, 2010). Rubbermaid is a very large company with non aligned operations. Also, some of the major issues of Rubbermaid are the unsatisfied customers and unrealistic business objectives. Newel does not have any previous experience of merging with a company of these characteristics, hence the probability of failure increases for the merger. The paper suggests that instead of merging with Rubbermaid, Newel may consider merging with small, local companies; this way Newel would become able to increase their product line and market gradually and efficiently.

Key Issue

The acquisition of Rubbermaid would provide various advantages to the Newell Company, however, there are certain disadvantages as well, which can cause issues for the company. One of the major advantages for Newell from this merger would be the quantum of growth (Bain & Company, 2011). As both of the companies involved in the merger process are the market leaders, they could serve the community better together, as compare to independent operations. For example, the Newell Company would get business benefits from the global presence and reputation of Rubbermaid. The Newell Company would get a chance of improving their product line in the international market; as there are various products offered by Rubbermaid, which the Newell Company's product line does not include. The operating income would also increase as a result of merger, which would be another advantage for both companies.

Despite of the above discussed advantages, the merger would also create threats of some serious disadvantages. The Newel Company would have to face a tough challenge, in order to combine the company's capacity with an external company. The risk factor associated with the merger is quite high for Newel; because currently Newel ...