Newell Company: The Rubbermaid Opportunity Essay

In October 1998, Ne hearty Company was considering a merger with Rubbermaid unified to form a new fraternity, Newell Rubbermaid Incorporated. The agreement would be through a tax-free exchange of sh bes valued at $5.8 billion. Newell had revenues of $3.7 billion in 1998 crossways three major product groupings Hardw be and Home Furnishings, Office Products, and Housewares. Rubbermaid is a renowned manufacturer of a wide range of plastic products ranging from childrens toys through housewares.Once the transaction is completed, Newell forget begin he exhibit of assimilating Rubbermaids operations through a affect c e precise last(predicate)ed Newellization. The companies require that the merger provide bring about synergy through the leveraging of Newell Rubbermaid brands. By 2000, these efforts are expected to produce increases over anticipated 1998 results of $300 to $350 jillion in operate income for the combined family.Reading the case analysis, there are many issues tha t I find are concerning this merger and I feel that Newell should not process with this merger. First of either, this is a tempered and alarming dispute to Newells capacity to integrate and strengthen acquisitions. How would Newell bring Rubbermaid into the newellization process since they do completely different products? Another question that comes to mind is how does Newell coordinate all its divisions and what changes give it finisure to make to arrive at synergy with Rubbermaid? Does the newellization process upheaval for Rubbermaid? Lastly, are the risks acceptable for Newell to merge with Rubbermaid? Newell needfully a genuinely well thought out job plan and has to answer these questions before they proceed. on that point are advantages and disadvantages in this merger. I leave alone start with the advantages. If this merger goes through, it will be a quantum step in Newells growth. The merger will be uniting two companies that are leaders in their industries. done the merger, Newell will gain the international presence that Rubbermaid has. Both companies can create synergy within their divisions and Newell can expand their product line internationally. on that pointare certain products in Rubbermaids product line that Newell does not rich person. Another advantage the merger will create is increased operating income. Some disadvantages of the deal are that Newell would be exposed to a tough challenge to the companys capacity to combine its acquisitions. One monolithic disadvantage is the risk that is involved in the deal for Newell.Newell is a in truth respectable company, and a company whose customers are very satisfied. They are very successful with their acquisitions due to their exemplary newellization process. Rubbermaid currently has many problems with their company such as bad customer relations, their operations are not lean, increases contestation has taken away market share, and their financial targets seem unrealistic. Ne well needs to substantiate these problems and realize what they will have to deal with if they join with Rubbermaid. Doing my research I have come up with many more disadvantages than advantages toward this merger and that is why I feel that these companies should not merge.In todays pedigree world, companies change hands all the time through mergers and acquisitions. Most of the time, the security measure propositions of new ventures are disregarded. Company A may have the most secure network, exclusively when they couple this network with Company B, youre exposing your company to a whole new set of risks. The first step is that Newell needs to assess the craft risk. Reputation loss is an issue, which Newell will be affect by. Rubbermaid has bad customer relations because it has angered its most important retail buyers with the overweight-handed way it has passed its rising cost. They have given their competitors a portion of shelf space.A big question mark comes to my mind is when I think about how Newell will bring Rubbermaid into the Newellization process. Newellization is described as a well established profit improvement and productivity enhancement process that is applied to integrate newly get windd product lines. The newellization process includes the centralization of separate administrative functions including data processing, accounting, and EDI, and inauguration of Newells rigorous, multi-measure, divisional operating go steady system. Reading the case analysis, Rubbermaid is extremely incompetent in these areas. Their operations are one of their biggest problems. According to thecase, although it excels in creativity, product quality, and merchandising, Rubbermaid is showing itself to be a laggard in more mundane areas such as modernizing machinery, eliminating needless jobs, and making deliveries on time. Looking at Rubbermaid and analyzing their problems, they have all told the setback qualities of companies that Newell has acquir ed in the past.Newells acquired companies were uprise businesses with unrealized profit possible. Rubbermaid has had a mature business for quite a long time and I do not see any room for unrealized profit potential. They have a very big international presence and Newell will end up hurting themselves once they have to deal with Rubbermaid and their incompetence. I do not feel that the newellization process fits Rubbermaid because these are two companies that have been close to for a while, and it is not like Rubbermaid is a start-up or a sanely recent company that can be changed around quickly and all of the sudden have lean operations, which newellization has proved it can do with previous(prenominal) acquisitions. Newell should stick to their business principle and do what they have done in the past, which is to acquire small to medium sized companies and integrate them into the newellization process and create an enormous tot up of synergy. I always believe that one should do something that they know best or have convey in and not pursue a totally different market in which that have no experience in.In this case, Newell does not have any experience with acquiring a company that is worth billions. A merger example that recently occurred which has turned into a blunder is the AOL Time Warner merger. These were two totally different companies in different industries that thought they could merge and be a giant in the Internet and Media/Entertainment industry. The outcome of this merger is that the chief executive officers of both companies are being laughed at in the business world. AOL Time Warner stock price is in the dump and the company is in real trouble. Newell can avoid all this by again look at their previous acquisitions and seeing what type of companies they acquired, which were companies with unrealized profit potential and who had the ability to create synergy in a short amount of time with Newells existing divisions.In conclusion, the de al is attractive for Newell but is not worth the risk that is involved. The key to merger and acquisitions is to not move on your first instinct and just merge or acquire a company thats price looks cheap.You have to determine what the company will look like in the future. Lack of foresight will cause a huge problem. Rising raw material costs along with Rubbermaids operational problems will impair the whole newellization process. Rubbermaid has very sour relationships with their clients and Newell will have an extremely difficult time furbish up those relationships. If the two companies merge, only investors or individuals who follow business news will know that these two companies are one. The average customer will becalm know of Rubbermaid as Rubbermaid. I feel that Rubbermaid brings a lot of heavy baggage to the table and will hurt the smooth and exemplary business that Newell has attained.