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Newell Company: The Rubbermaid Opportunity Essay

1303 words - 6 pages

Newell Company: The Rubbermaid OpportunityIn October 1998, Newell Company was considering a merger with Rubbermaid Incorporated to form a new company, Newell Rubbermaid Incorporated. The agreement would be through a tax-free exchange of shares valued at $5.8 billion. Newell had revenues of $3.7 billion in 1998 across three major product groupings: Hardware and Home Furnishings, Office Products, and Housewares. Rubbermaid is a renowned manufacturer of a wide range of plastic products ranging from children's toys through housewares.Once the transaction is completed, Newell will begin he process of assimilating Rubbermaid's operations through a process called "Newellization." The companies ...view middle of the document...

Through 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. There are certain products in Rubbermaid's product line that Newell does not have. 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 company's capacity to combine its acquisitions. One big disadvantage is the risk that is involved in the deal for Newell. Newell is a very 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 competition has taken away market share, and their financial targets seem unrealistic. Newell needs to understand 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 today's business world, companies change hands all the time through mergers and acquisitions. Most of the time, the security propositions of new ventures are disregarded. Company A may have the most secure network, but when they couple this network with Company B, you're exposing your company to a whole new set of risks. The first step is that Newell needs to assess the business risk. Reputation loss is an issue, which Newell will be affected by. Rubbermaid has bad customer relations because it has angered its most important retail buyers with the heavy-handed way it has passed its rising costs. They have given their competitors a lot 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 acquired product lines." The newellization process includes the centralization of key administrative functions including data processing, accounting, and EDI, and inauguration of Newell's rigorous, multi-measure, divisional operating control system. Reading the case analysis, Rubbermaid is extremely incompetent in these areas. Their operations are one of their biggest problems. According to the case, "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 unnecessary jobs, and making deliveries on time." Looking at Rubbermaid and analyzing their problems, they have totally the opposite qualities...

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