Monmouth Case Study
- Case Study -
1) Describe briefly Robertson’s business and the key factors to succeed in it. How well is Robertson doing from an operational standpoint? What KPIs should one consider?
Robertson is one of the largest domestic manufacturers of cutting & edge hand tools and a leader in its two main product areas: * Clamps and vises: the company holds a 50% share of a market estimated at $75-million, with a reputation for high-quality and a very strong brand name * Scissors and shears: the company holds a 9% share of a market estimated at $200-million, with an equally high reputation for quality
From an operational perspective, the annual sales growth of 2% is behind the industry average of 6% per year, and …show more content…
b) Why do the projections include the planned improvements in Robertson’s operations?
The Monmouth executives are trying to capture the value of Robertson assuming the realization of synergies, given their approach to the deal as a strategic buyer, instead of a purely financial buyer.
c) Rudd justified the assumed no sales growth rate post‐2006 by saying “We think the business will by then no longer be gaining market shares”. What do you think of this?
Stagnant market share does not equate to “no sales growth”; assuming a normal expansion of the market, a company with constant market share can expect its sales to grow at exactly the market growth rate. Mr. Rudd’s projection actually implies that the company will be losing market share after
5) What is Robertson’s current ratio of NWC to Sales? Revisit the three scenarios above assuming that this ratio is cut by one third.
Using 2002 data, Robertson’s NWC (Current Assets – Current Liabilities) to Sales Ratio is 43%.
We can improve the ratio by one third through the following set of measures: * collecting receivables at 43 days, on average, from the current 52 * paying suppliers at 36 days instead of the current 19 * decreasing the inventory to 35% of COGS instead of the current 47.5%
8) Who are the different parties affected by the acquisition? What are their likely objectives? In particular, why is Simmons eager to sell its position to Monmouth for $50 per share?