Newell: Acquisition Strategy

Strategic management:
Case analysis

Presented By
Group 5
Gaurav Bajaj F005
Meghana Chittibomma F015
Vikrant Shangloo F025
Harish R F035
Abhuday Aggarwal F045
Abhinav Singh Rathaur F055

 COMPANY OVERVIEW
First acquisition was of a bankrupt manufacturer of brass curtain rods
Coincided with Americans moving out of cities to suburbs
Early customers were small hardware stores, industry builders and specialty realtors
In 1937, Leonard Ferguson became the owner and his son Daniel Ferguson became the
CEO in 1966.
Company always followed a product line strategy focussed on giving customers quality
products.
He came in at a time when revenues were at $14 million with a limited product line and no
future strategy.
They went public in 1971.
Setup a disciplined strategy based on acquisition.
Acquired 30 businesses in the next 20 years.
Focussed on operational efficiency and profitability.
Underwent organisational transformation in 1974,
Divided companies in different entities responsble for marketing and manufacturing.
 GROWTH STRATEGY
Redirect acquired businesses to focus on Newell's core business offerings.
Revenue generation was purely based on turnarounds of acquired companies
Acquired companies that were under performing due to high operating costs with operating margins
less than 10%
Newell made existing employees leaders at these companies and Newellization usually took between
6-18 months.
Focussed on companies who were leaders in their market segment and primary was on shelf space.
Acquired smaller companies to reduce competition.
Well known acquisition strategy of purchasing a minority stake followed by a full takeover
Stuck to domestic companies due to a lack of distribution channels abroad
In 1989, they moved their focus to businesses that catered to the mass retail customer.
 MASS RETAILER INDUSTRY
Large scale mass retailers like Walmart changed the industry in the 1970s
By 1992, 3 chains covered 70% of the discount retail market
They had a large control over pricing, scheduling and quantity of merchandise shipped
Threat of competitors forced manufacturers to respond with greater distribution and warehousing efficiency
Newells responded to this by focussing on product furnishing and quality service to mass retailers.
Customer service was of utmost importance and they were called the no nonsense supplier with close to 100%
efficiency.
Focussed on getting new businesses to optimise their supply chain and adhere to the Newells standard
This helped justify their high prices
Newells invested in technology and in 1980's, their top 20 customers placed 90% of their electronic data
interchange system
A quick response sytem made it easy to restock depleted stock in customer warehouses
 Creating value for Shareholders
EDI/Quick Response
Newell invested heavily in
computer and communications
to match customer demands.
Quick response monitored
inventory to restock customer
warehouses automatically thus
making them able to manage
smaller inventories.
Line Fill/ Delivery
Newell managed stock more
than industry standards.
Newell goal was to become a
"no problem" supplier in the
industry.
Their delivery standards
were quite high, close to
100%
Profitability
Newell maintained a standard,
where their target SG&A cost was
always <15%.
Newell managed operations in a way
that they had set a standard that
operations margin would be >10%.
Even in the high volume, low-cost
product, they sold their product at a
5-10% premium.
In the 1990's they had a 21% S&P for
a ten year period.
In 1992 they were ranked 24 in the
Fortune 500 list of highest total
return for investors for over ten
year period.
 Glassware
In 1987, Newell entered the market by acquiring
Anchor Hawking.
Made it more operationally efficient.
Saved $32.4 Million by slashing excess inventory.
Newell's Exited market in 1992 by selling it for $150 Million.

competing
businesses
Office Products
Entered in 1991 with the acquisition of Keene
Manufacturing Co. and W.T. Rogers.
Same year acquired an 18% stake in Stuart Hall.
With 17 Million Home offices, it was one of the
line with future growth.
IFE Matrix
EFE Matrix
 Sanford:
EFE Weighted Score = 3.3
IFE Weighted Score = 2.83

Levolor:
EFE Weighted Score = 2.45
IFE Weighted Score = 2.78
 Recommended Acquisition
We recommend that Newell Company acquire Sanford
Sanford offers a business opportunity in a new product line with an existing
strong management team
Sanford has a good distribution network which is necessary for a Newell
company.
They distribute to superstores and warehouse clubs
They have access to Sterling Plastics Co's product line

Thank You!!