Stanley Black & Decker, Inc Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

This is a case about two companies Stanley Works, Inc. and Black & Decker Corp. Stanley Works was a hand tool company and Stanley works was established in 1843, and its headquarter is located in the New Britain, Connecticut. Black & Decker also operated in the same line of business, it was a power tool company and established in 1910, it’s headquarter is located in Towson, Maryland. Both Companies had agreed on strategic alliance on November 2, 2008.

Analysis

Strategic Alliance between Stanley work and Black & Decker was going to take place. Merger and acquisition results in different synergies, the main reason for merger between Stanley Work and Black & Decker was cost savings. Since both companies operating in the same industry, therefore it would provide both of them with assistance in reducing cost, which has been incurring due to same departments being operated.

After strategic alliance, $350 million annually was expected to be saved by the combined company. 4000 layoff from global workforce of 38000 expected to be made after the transaction. Since significantly layoff would be made therefore it would result in cost savings.

$350 million cost savings are divided into different savings. $135 million are expected to be saved due to consolidation of Business Unit & Regional. $95 million savings would result due to corporate overheads i.e. public company cost and management, facility and IT integration. $75 million savings expected to save due to purchasing i.e. direct and indirect materials and freight. Lastly, $45 million will be saved due to distribution Network consolidation and plant footprint consolidation.

Due to strategic alliance, shareholders of the Black and Decker would be paid with 21.6% premium i.e. through exchange of stock. Generally, 20% to 40% premium is enough to convince the shareholder for dispose of their shares. 21.6 % premium has potential to convince shareholder for disposing of shares.

50.5% of the stock in the combined company will be retained by shareholders of the Stanley and 49.5% of the stock in the combined company will be retained by shareholders of the Black & Decker. The CEO of Stanley would become CEO of the combined company and The CEO of the Black & Decker would become executive chairman of the combined company.

Both CEOs will be gaining huge amount of compensation due to merger. As part of merger contract, John Lundgren, CEO of the combined business would receive a grant of the restricted stock units, this value is equal to the value of an option to purchase 1.1 million share of Stanley common stock. Sufficient and adequate disclosures are required in the financial statements regarding compensation of the directors. Directors’ remuneration should be based on the basic salary plus the performance related bonuses.

New three year contract would be given to Nolan Archibald, executive chairman of the combined business. One time grant of stock options on 1 million of the combined company’s shares would be given to Nolan Archibald. Special incentive would also be given on the basis of the cost savings. There are huge incentives being offered to the CEO and the executive chairman of the combined business, therefore it could create conflict of interest. Director’s objective should be aligned with the objective of the company.

Executives of the Black & Decker had change of control agreement. If they are terminated and experienced in a change in responsibilities as a result of the merger, payments could be triggered. It means acceleration towards vesting period. Those amounts, which are going to be recognized over the 3 years period, will be recognized immediately.

Stanley Black & Decker, Inc Case Solution

Corporate Governance provides best practice for running the company. These incentives should be made according to the rule of Corporate Governance. CEO and chairman of the Combined Company will have more benefits. It is not in the best interest of the shareholders. Proper evaluation of incentive should be made in relation to compensation of the Directors;however, Nolan Archibald agreed to forfeit his severance payments because he will be gaining more than amount of golden parachute..................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.