This paper concentrates on the primary theme of which, in any case, could cost many millions of pounds in legal and consultancy fees even if the merger was friendly and, ultimately, successful. If the merger/acquisition was hostile, the cost could easily be two or three times higher with no guarantee o in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.
POLICY & STRATEGY
Mallard Drake Corporation
is not quite as worried about the merger and acquisition ambitions of Walter H.
Cordwainer III as he was a few months ago.
mood was turning against the merger of same-size companies, which so often
seemed to fail. And which, in any case, could cost many millions of pounds in
legal and consultancy fees even if the merger was friendly and, ultimately,
successful. If the merger/acquisition was hostile, the cost could easily be two
or three times higher with no guarantee of success at the end.
always talked the language of merger, but Simon knew that, in practice, the
larger of the two tended to take over, so that what in fact happened was
virtually a take-over. Mallard Drake, although nearly the same size as Amco,
was nevertheless the smaller of the two, and in any case, lacked Amco’s
had no intention of being taken over if he could avoid it and had made it clear
that he would fight. Even if Cordwainer had the stomach for a fight, Simon
doubted that he would get the support he needed from Amco’s major shareholders.
Financial institutions were increasingly looking more favourably on non-equity
based strategic alliances rather than mergers (particularly mergers between
same-size companies) because such alliances could offer many of the benefits of
M&A without so many attendant costs and difficulties.
Cordwainer was doing a good job at Amco and shareholders had been known to back
the man, even when they were not so convinced about the ideas. Profit-hungry shareholders
often liked a streak of ruthlessness in a CEO and Cordwainer might, even yet,
get his own way.
Henderson was taking nothing for granted and was looking for a development
strategy which would be good for Mallard Drake whilst at the same time putting
it out of the reach of Amco.
the things that Simon admired about Amco was its dedication to research and
development in the field of the multi-billion pound global electronic toys and
games market. Simon was beginning to think that it was time he put Mallard
Drake’s new product strategy under the microscope. Design was important in the
toy industry, which was always hungry for something new and Simon felt that a
new initiative in this area would go a long way toward raising the value of Mallard
of the traditional ‘hands-off’ approach towards the management of its acquisitions
(which now formed the bulk of Mallard Drake businesses), product design was
very much a piecemeal activity. It had, to be fair, produced many very good
designs in a whole range of products, from soft toys to construction sets, but
it was something of a hit-and-miss approach.
Mallard Drake businesses employed full-time designers whereas others made use
on an ad-hoc basis of out-of-house designers. There were some who did no
serious product development at all apart from relatively undemanding exercises
like printing new jigsaw puzzles and producing paper party hats in more modern
colours. Simon wondered whether or not he might take a leaf out of Amco’s book
and begin to centralise research and design strategies. Perhaps design
expertise could even become a Mallard Drake core competency under a new ‘Creative
also wondering whether Mallard Drake is losing out on the opportunity to create
strategic alliances with other companies. Large corporations like Disney and
McDonald’s have successfully mounted strategic joint exercises where McDonald’s
have enjoyed the exclusive rights to offer figurines based on Disney movies to
young diners buying a child’s meal.
is not the only owner of popular characters which could spin off into jigsaw
puzzles, poseable models and the like. Books, comics and TV series all offer
opportunities which, so far, Mallard Drake has failed to exploit.
thinks that a new push to get into this lucrative licensing market could ride side-by-side
with a new product design strategy. Owners of merchandisable characters would
be able to see the quality of Mallard Drake toys and the commitment to detail
and would, at least, be willing to talk about some sort of strategic alliance.
Since he is already thinking of taking a leaf out of Amco’s book he decides
that it might be time to take another leaf, this time out of Disney’s book, and
appoint an ‘Alliance Executive’ to seek out and develop such possibilities.
back to the threat of a hostile bid from Amco, Simon believes that Mallard
Drake shareholders will be sufficiently impressed with these two proposals that
they might give him their whole-hearted support and not be quite so willing to
listen to an Amco bid.
the shareholders behind him and a positive initiative on both fronts, backed by
the appointment of the two new top-level executives, he envisages that Mallard Drake
could soon be as big as, if not bigger than, Amco. If nothing else it would
raise the value of Mallard Drake which is always a good way of scaring off a
immediate possibility is on the horizon. Mallard Drake’s Acquisition Team have
advised him that they are having a second look at Montmorency Dolls and he is
quite happy that they should do so.
he accepts their recommendations on acquisitions, but it is always understood
that he has the final word. Privately he would be surprised if they found any
substantial reason to change their minds. They had looked at Montmorency Dolls
not so very long ago and decided against it.
have, however, also drawn his attention to Xcel Toys. Simon had heard about the
difficulties faced by Xcel and knew that it was on the market and could be
bought cheaply by a corporation willing to make the attempt to turn it around.
never been Mallard Drake’s policy to buy ailing businesses, but he also knows
that corporate policies have to evolve. Maybe the time is right for a change.
He tells the Acquisition Team to go ahead and see if Xcel is worth buying. He
awaits their findings with interest.
Xcel Toys Xcel Toys (Excellent Toys
at Affordable Prices) was a business in crisis. Whilst never being anything
like as big as either Mallard
Drake or Amco, it had, not so very long ago, been able to stand shoulder to
shoulder with them as a respected provider to the toys and games market. But its profits had
dropped badly in recent years and were now
only about 55% of its peak profits figures.
analysts blamed Managing Director Mike Hall who had been brought in when Gerald
Allders had bought the business as a going concern in 1997.
a very successful American businessman, who had built a multi-billion dollar
fortune putting together a conglomerate which included everything from clothes
to cosmetics and publishing to pharmaceuticals, had spotted the chance to get
into the multi-billion dollar toys and games industry when Xcel came on the
market. The then owner of Xcel, the son of the founder, had never married and
had nobody to leave his business to. He had decided to sell up and retire and
was very happy to take the deal offered by Allders.
Allders, for all his success, was something of a recluse who shunned the
limelight. Consistent with his treatment of earlier acquisitions he was quite
content to run Xcel under its original name and, again consistent with his
earlier decisions, he put in charge a man who had proved himself in one of
Allders’ other businesses. Mike Hall knew a great deal about fashion; he knew
absolutely nothing about toys.
by this lack of experience (Allders was famous for making cross-industry
promotions of his top executives and expecting them to succeed), Hall very
quickly put together a plan which, he believed, would increase Xcel sales to a
level which would, at least, equal Mallard Drake’s sales if not the somewhat
larger Amoco’s. He believed that under the old ownership the concept of ‘Excellent
Toys at Affordable Prices’ had not been pushed nearly far enough. He initiated
a drive to produce more excellent toys at even more competitive
Prices He decided to hit the market with 100 new toys
under a new logo ‘Xcelsior Toys’. To make some room for this new range, he
stripped out some 40 or 50 of Xcel’s traditional toys, partly because he believed
them to be too old-fashioned and partly to release resources to divert to the
new range. He also, with Gerald Alder’s’ agreement, borrowed heavily to finance
new production capacity. Even with the cancellation of the retired Xcel toys
the business now had a product portfolio of some 340 toys, more than it had
ever previously produced at any one time in its entire history. It simply did
not have the capacity to handle such a portfolio.
Xcelsior range was to be given a much brighter and more modern packaging than
the remaining Xcel range and some longer-serving Xcel employees remarked that
in comparison to the Xcelsior range Xcel Toys were now in danger of looking
rather dull. They expressed the fear that Xcel branded toys would suffer in the
market place alongside Xcelsior branded toys.
failed to persuade Mike Hall that all the old products should be re-branded
with the new name. He thought that this would take the gloss off Xcelsior,
which he wanted to be a totally new concept.
they did persuade him to at least re-package Xcel so that Xcel toys would not
look quite so dated next to Xcelsior toys on the retail shelf. This concession
was to cost Xcel in excess of another $1 million re-packaging old lines and was
just one of the nails in the coffin of Mike Hall’s plans.
in the overall scheme of things it turned out to be a fairly small nail. Mike
Hall’s undoing lay in his failure to co-ordinate. He had simply moved ahead too
quickly on three fronts, ‘product design and development’, ‘production’ and ‘marketing’,
and in the process had created a terrible muddle.
marketing strategy for the new range involved increasing the size of the sales-force;
introducing sales-force incentives for pushing the new Xcelsior range; a
massive advertising campaign; and trade-incentives to ‘buy his way onto the
retailers’ shelves’. It was this latter tactic which was to prove most critical
in bringing about the collapse. Mike offered the trade two main benefits:
massive discounts on bulk orders and a ‘no questions asked’ Sale or
(SOR) guarantee. Retailers could not lose and cheerfully placed very large
orders. It was not long before the order books were full to overflowing and, in
fact, some of the products ordered had not even gone into mass production
before it became obvious that the orders could not be filled.
retailers vented their anger by cutting back on their traditional orders for
Xcel goods. In any case, the sales-force, eager to earn the bonuses for pushing
Xcelsior, had been neglecting Xcel in the process. Xcel became the victim of a ‘double-whammy’.
Mike Hall’s plans had assumed that Xcel sales would not suffer as a consequence
of the push on Xcelsior and so he had done nothing to protect them beyond the
production and marketing plans already in place.
those retailers whose orders had been filled experienced disappointing sales. It
soon became apparent that the most excellent thing about the ranges was, in
fact, the packaging. The toys offered very little that was new. The new
Xcelsior range never really took off and over a period of months there was a
steady trickle, which soon became a flood, of unsold stock returned under the
irony was that this unsold stock could have been delivered to the retailers
whose orders had not been filled if the distribution had been better planned.
The Xcel strategy of fulfilling each order in full on a ‘First Come – First Served’
bases had resulted in volumes of unsold stock sitting in one retailer’s shelves
whilst another was fuming over an unfulfilled order.
massive advertising campaign had failed to save the day. It had impressed the
retailers who had seen a preview of it and had been, along with the generous
discounting policy and the SOR guarantee, a key factor in encouraging them to
place large orders. Unfortunately it failed to impress the people who really
mattered – the children themselves.
children who had got hold of Excelsior toys had lost no time in telling their
friends that they did not live up to the promise. This negative ‘word of mouth’
(WOM) effectively killed the advertising.
had lost a great deal of goodwill. It had accumulated warehouses full of unsold
and unsellable stock. The new salespeople had to be laid off. The traditional
Xcel range had been damaged alongside the failed Excelsior range.
and the value of the business plummeted.
Hall, ever ambitious, was nothing if not determined. He came up with another
brainwave for Xcel Toys: a range of excellent educational toys and games. But
Gerald Allders had had enough. Chalking up his first business failure and
putting it down to experience, he resolved to put Xcel Toys back on the market.
Montmorency, the founder of Montmorency Dolls, died in the year 2000 aged 78
and, as she had always promised, she left her share of the company to be
divided equally between her two surviving children.
meant that Frederick, then aged 61, owned 30% and his sister Joanna, then aged
56, owned the same. Between them, they had a controlling interest of 60%.
four grandchildren (Frederick’s two sons, Alan and Keith Montmorency, and
Joanna’s children Brian and Marilyn Foster) owned 10% each. This gave them a
total of 40% which was insufficient to force a sale of the business which was
what the four had wanted for some time.
ambition to sell the business was not shared by their parents who remained
loyal to their own mother’s dream of keeping Montmorency Dolls as a family
cruel twist of fate, Joanna, whose health had been poor for some time, died
within a year of her mother and her 30% share was inherited equally by Brian
and Marilyn. This turn of events reduced Frederick to a minority shareholder
position and gave the four grandchildren a 70% holding.
was not a fool. He knew only too well the mood of the younger shareholders and
had no wish to get involved in a bitter struggle which he knew he could not
win. Furthermore, he had always been a prudent man and as a result of good
investment and a generous, company-funded, pension scheme, he could look
forward to a comfortable retirement.
wishing to see his own children disadvantaged he made a gift without reservation
of his share of the business to his sons equally. This meant that should he
survive for another five years, there should not be death duty to pay on the
gift but that if he died within five years, it would be treated as an
inheritance and subject to death duty. He had no intention of following his
sister into an early grave.
not surprised when, after a suitable period of grieving for their double loss, the
four owners of the business told him that they had decided to sell. They now
owned 25% of the business each and, therefore, between them they owned it
outright. There was nothing to stop them.
saw difficulties ahead however, but wisely decided to keep his thoughts to himself.
It was one thing to be unanimous in deciding to sell. It would be something
else to agree as to who to sell to. He hated to admit it but his sons were much
harder temperamentally than his nephew and niece, who had inherited some of
their mother’s sensitivity.
and Keith would go for the highest bidder and let the small number of full-time
employees and the larger number of part-time employees takes their chances.
Brian and Marilyn had quite different views on business parenting and would, he
thought, go for the bidder who would undertake to provide employment for the
current work-force, even if that meant accepting a lower price. A 50:50 stand-off
was, at least, a probability.
only thing that Frederick was sure of was that none of the four would, themselves,
wish to stay. From what he believed he knew about them, with the possible
exception of Marilyn, none of them even wished to stay in the toys and games
the outcome, he wished them well. His gift without reservation meant that he
now had absolutely no say in how the business was run. A comfortable retirement
beckoned. The young (perhaps not so young) warriors could fight their own
was not so far out in his assessment of his niece. Of the four, she was the one
who might be persuaded to stay. She did like the toy and games industry. She
really enjoyed taking part in the toy and craft fairs, particularly when these
gave her the opportunity to travel aboard, and she loved being involved in the
design process of creating new characters.
she had actually felt frustrated about was the claustrophobic nature of a small
family business together with what she thought was a narrow vision of producing
mainly for the adult collector’s market.
to either her brother or her two cousins, she had made an informal approach to
Mallard Drake suggesting that they might like to have another look at
Montmorency Dolls. She knew that Mallard Drake conducted a friendly open search
strategy in selecting acquisition candidates and she thought that none of the other
three would be surprised if Mallard Drake appeared to take the initiative.
She felt sure that they
might take a different view the second time around.