Sears/Kmart Merger Case Study
On November 17th, 2004 Kmart and Sears publicly announced the impending merger of the two struggling companies to become Sears Holding Corporation. Kmart, for 11.5 billion dollars would be the buyer, however due to strong brand name recognition and history, Sears would be the face of the new conglomerate. At the heart of this merger was Edward Lampert, an extremely successful hedge fund manager who had made a name for himself by, purchasing companies in the red and making them profitable once again. There were numerous detractors who though the idea of simply combining two once formidable chains, who now were both failing, into the third largest retailer without regard for the structural problems that doomed both companies in the past would simply delay the inevitable. Lampert thought otherwise, even without extensive management experience, he had previously demanded positions on the executive board of past companies he had bought majority shareholder status in when they were in the red. From this vantage point, he did have some experience with faltering chain stores, and this situation was similar.
Environment
The United States economy had a slight rebound from the lingering recession of the dot.com bubble burst of 1999. In 2004 gross domestic product climbed 4.4%, outpacing the previous three years growth (Wood 2004).
The trend of big box store openings was in the waning period of their ascendancy of dominating how the consumers make purchases. They were no longer new and exciting, however they had provided consumers with a one-stop shopping experience that cut down on time and price. Big-box retailers such as Home Depot, Best buy, and Wal-Mart, were welcomed in virtually every urban area throughout the United States, and found success in rural areas as well. This did not bode well for either Kmart or Sears. These outdated retailers could not compete on the basis of price, selection, or convenience of the new entrants.
Sears and Kmart both do have strong
Environment
The United States economy had a slight rebound from the lingering recession of the dot.com bubble burst of 1999. In 2004 gross domestic product climbed 4.4%, outpacing the previous three years growth (Wood 2004).
The trend of big box store openings was in the waning period of their ascendancy of dominating how the consumers make purchases. They were no longer new and exciting, however they had provided consumers with a one-stop shopping experience that cut down on time and price. Big-box retailers such as Home Depot, Best buy, and Wal-Mart, were welcomed in virtually every urban area throughout the United States, and found success in rural areas as well. This did not bode well for either Kmart or Sears. These outdated retailers could not compete on the basis of price, selection, or convenience of the new entrants.
Sears and Kmart both do have strong
Bibliography: http://www.fastcompany.com/magazine/77/walmart.html ‘Wal-Mart Facts and News,” Retrieved November 20, 2008 from http://walmartstores.com/FactsNews/FeaturedTopics/?id=13 http://www.chicagobusiness.com/cgi-bin/news.pl?id=19617 Barr, Aaron (2007, May 7), “Sears: Where It Begins,” Adweek.com: Retrieved November 20, 2008 from http://www.adweek.com/aw/national/article_display.jsp?vnu_content_id=1003581783 Jacobs, Karen and Aarthi Sivaraman (2008, November 24), “Sears’ Offers $6.75 a Share for Restoration,” 5 NEWSonline.com: Retrieved November 24, 2008 from http://www.kfsm.com/Global/story.asp?S=7410632