Stanley Black & Decker’s (SWK) record of harvesting synergies from its acquisitions is among the best and is something that we discussed in our company overview in April this year. Therefore, based on the precedence, the company’s projections do carry a lot of weight. SWK has estimated that the cost synergies from this acquisition are likely to be around $80 million–$90 million.
A major portion of the synergies, or ~$50 million–$60 million, are expected to be realized on rationalizing roles and responsibilities and cutting down discretionary expenses. The consolidation of manufacturing footprints and overheads are expected to create savings of ~$20 million. This consolidation also includes certain transportation cost efficiencies that the company will realize in North America. The remaining $10 million in savings are expected to be derived from sourcing material purchases and other benefits derived when you have the combined scale of SWK and Newell Tools.
Strategic rationale behind the SWK–Newell deal
In terms of strategic rationale, there couldn’t have been a better acquisition target for Stanley Black & Decker (SWK). Newell Tools is one of the foremost providers of premium industrial tools and cutting and power tool accessories. The business is also a global leader in band saw blades and is number two in linear edge power tool accessories. It also has a dominant position in several other product categories. Therefore, the acquisition simply strengthens the position that SWK has in the global tools and storage industry. Additionally, the strength of the Irwin and Lenox brands of Newell (NWL) and complementary product lines in certain areas could allow SWK to cultivate additional synergies through cross-branding and other strategies.