Newell case
Newell Company: Corporate Strategy
Newell, manufacturer and marketer of basic home and hardware products, is a rather unrelated diversified company with more than 30 operating businesses. Grown over the years through many acquisitions, the company is facing one of her most important challenge: the acquisition of Calphalon (high-quality cookware) and Rubbermaid (plastic products). Both the acquisition were part of that period’s CEO’s plan to increase Newell’s strength on the market, and to boost the capitalization to $10 billion, in order to reach higher EPS and, in so doing, create more value for shareholders. Calphalon is a private high-end aluminum cookware manufacturer, distributed in department and specialty stores and with a new developing product line for the mass retailer Target. Analyzing Calphalon’s issues, it comes out that its acquisition by Newell (consisting in a process of related diversification) would create value for both companies. In fact we must consider all the valuable things that this cookware manufacturer has to offer to its acquirer and vice versa: new channels where to sell premium products, that is to say non-mass merchandise markets, without cannibalizing Newell’s products sold in mass retailer stores (remember that Newell owns other cookware manufacturers); enhancement of competitive advantage through skills sharing, like Calphalon’s expertise in developing pull strategies and building strong connection with final consumers; strengthen Newell’s reputation by acquiring a prestigious brand name, thus not only functional objects, but also emotional ones; existence of a still profitable market in which other competitors haven’t reached a real leading position yet. About this last point, it’s important to highlight that the acquisition by Newell is fundamental for Calphalon in order to reduce its prices, always 20% higher than its main competitor Mayer. According to the theory, if the diversification has solid foundation, it allows to
Newell, manufacturer and marketer of basic home and hardware products, is a rather unrelated diversified company with more than 30 operating businesses. Grown over the years through many acquisitions, the company is facing one of her most important challenge: the acquisition of Calphalon (high-quality cookware) and Rubbermaid (plastic products). Both the acquisition were part of that period’s CEO’s plan to increase Newell’s strength on the market, and to boost the capitalization to $10 billion, in order to reach higher EPS and, in so doing, create more value for shareholders. Calphalon is a private high-end aluminum cookware manufacturer, distributed in department and specialty stores and with a new developing product line for the mass retailer Target. Analyzing Calphalon’s issues, it comes out that its acquisition by Newell (consisting in a process of related diversification) would create value for both companies. In fact we must consider all the valuable things that this cookware manufacturer has to offer to its acquirer and vice versa: new channels where to sell premium products, that is to say non-mass merchandise markets, without cannibalizing Newell’s products sold in mass retailer stores (remember that Newell owns other cookware manufacturers); enhancement of competitive advantage through skills sharing, like Calphalon’s expertise in developing pull strategies and building strong connection with final consumers; strengthen Newell’s reputation by acquiring a prestigious brand name, thus not only functional objects, but also emotional ones; existence of a still profitable market in which other competitors haven’t reached a real leading position yet. About this last point, it’s important to highlight that the acquisition by Newell is fundamental for Calphalon in order to reduce its prices, always 20% higher than its main competitor Mayer. According to the theory, if the diversification has solid foundation, it allows to