Rubbermaid Merger Case

As a member of the Newell Board, evaluate the proposed merger with Rubbermaid. How would you vote?
I would vote against the propose merger with Rubbermaid for the following reasons:

1. Difficulty in the “newellization” of Rubbermaid
• One of the key factors to successful acqusition is the execution of the integration process.
• “Newellization” is defined as an “enhancement process employed to bring a newly acquired business up to Newell’s high standards of productivity and profit.” Part of the process is to centralize key administration functions such as data processing, accounting, EDI, and inauguration of Newell’s rigorous operating control system. Unfortunately, Rubbermaid is weak in all these areas. For example, although Rubbermaid excels in creativity and merchandising, it is a laggard in “mundane areas” of its operations. It seems like Rubbermaid has the exact opposite of the qualities that Newell has targeted in the past for mergers.
2.
Newell may not the capacity to integrate Rubbermaid
• The “newellization” of Rubbermaid is also made more difficult by the sheer size of the company. The majority of Newell’s past acquisitions have been relatively smaller companies that they have successful applied the newellization process and generated great synergy. In the case of Rubbermaid, it is a company that is worth billions; therefore, Newell may not have the necessary experience needed to integrate such a massive company. Even if “newellization” is possible, it may take a long time because it is difficult to suddenly change the operations of a well-established company, like
Rubbermaid.

3. High risks involved in the acquisition of Rubbermaid due to its existing problems.
• Newell has gained a reputation for making successful acquisitions using an established process called “newellization.” One of Newell’s fundamental competitive strategies is to differentiate on the basis of providing superior customer service to its customers. Rubbermaid currently has problems with poor customer relations because it has angered its retail buyers with “the heavy-handed way it has passed along its ballooning cost,” thereby, forcing retailers to give more shelf space to competing firms. In addition, Rubbermaid is currently facing other problems such as ineffective operations, increasing competition, and unrealistic financial targets. From a financial standpoint, the rising raw material costs will further challenge the “newellization” process.

4. Difficulty in the valuation of acquisition
• One of the key factors to successful acquisition is the price.
• Perhaps Newell is really eager to acquire Rubbermaid so it can generate revenue and operating synergies through leveraging the Rubbermaid brand across different products. As a result, this eagerness may have blindsided them on Rubbermaid’s incompetence, and made them overestimate the company’s value.