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Mergers and Acquisitions: Case study of Staples Inc and Office Depot
Name
Institution
Contents
Executive Summary.......................................................................................................... 3
1.0 HISTORY OF BOTH COMPANIES............................................................................. 4
1.1 Staples Company.................................................................................................. 4
1.2 History of Office Depot Company............................................................................. 5
2.0 STRENGTHS AND WEAKNESSES OF THE COMPANIES.............................................5
2.1 Staples Company................................................................................................. 5
2.2 Office Depot company........................................................................................... 6
3.0 MARKET SHARE................................................................................................... 7
3.1 Market share of Staples Company............................................................................. 7
Executive Summary
The terms Mergers and acquisitions are used interchangeably to describe a scenario where companies consolidate and operate as
one entity. The fundamental principle of the merger or acquisition is to create shareholder value over the value of the two companies put
together. Mergers and acquisitions are most common during tough economic times when times are tough. The rationale for this is the
Currently, plans are underway for Staples and Office Depot, which is a company that specializes in office supply and retail. Today,
Staples offers approximately 2,900 different office products that utilize recycled content (Schenck, 2012).
1.2 History of Office Depot Company
Office Depot Company is a public retail company that was founded in 1978 by Bernard Marcus, Ron Brill, Pat Farrah and Arthur
Blank. The companys headquarters is in Atlanta and has other subsidiary branches in 2,248 other locations worldwide as off 2011
(Schenck, 2012). The company specializes in Home appliance tools, garden supplies, plumbing and flooring, lumber and paint. The
company so far has approximately 365,000 employees worldwide. The founders of Office Depot wanted to form a company that could
keep their values of respect, corporate social responsibility and excellent customer service alive (Schenck, 2012). The companys
greatest competitor is Lowes which is located in both the United States and Canada.
2.0 STRENGTHS AND WEAKNESSES OF THE COMPANIES
2.1 Staples Company
The major strength of Staples is the diversity in their services. Staples also has over the years managed to become a renowned
firm with a stable and robust customer base. The company also has developed infrastructure since the stores are located in welldeveloped areas that are densely populated. This gives them a location benefit. In addition, the company has reliable suppliers who
ensure all raw materials are passed through a thorough quality check. This has helped to promote customer satisfaction.
On the downside, Office Depot has rapidly expanded to other unknown regions in the world without prior research on the
regions. Doing this could lose the company money since they do not have appropriate contingency plans in case of failure in those
regions. Another weakness is the company inability to meet the needs of their female consumers. For example, most of their stores have
a rugged appearance with rack-type displays and non-elegant stores which do not appeal to their female customers. Hence, the stores are
considered as unappealing. Lastly, the company has a relatively small online presence
3.0 MARKET SHARE
Market share refers to the percentage of sales that go back to the company. It refers to the companys portion of sales in the
market. This includes the market size. The market share helps analysts to determine the market position of a company as well as their
competitiveness. The market share also is a reflection of the consumers preferences in the market. The market share is calculated as
follows:
Market Share = (Sales Revenue in Time Period X) / (Relevant Market's Total Sales Revenue in Time Period X)
16.62 in the stock exchange in March 2015 (Schenck, 2012). The companys revenue is $22.49 billion with the companys revenue per
share being $35.10. The companys gross profit for the same fiscal period stood at $5.80 billion. The companys enterprise value stood
at $11.18 billion. Staples operating cash flow trailing twelve months as of January 2015 stood at $1.04 billion with a levered free cash
flow of $861.33 million of the same period (Schenck, 2012; White, 2002). In addition, the companys market cap was $10.7 billion and
a dividend yield of 2.95 percent. Based on the fiscal year ended December 2014, the companys annual profit stood at $134.5 million,
and the annual revenue stood at $22.5 billion. The companys EPS for the current quarter is projected to be $0.17 (Schenck, 2012).
3.2 Market share of Office Depot Company
Office Depot shares shot up to $88.23, which was 6 percent increase from the previous year in 2013. The companys sales also
increased by 5.8 percent compared to the same fiscal period the sales in the previous year. Office Depots second quarters earnings for
the year 2014 were recorded at $23,811 million which was an increase from the $22,522 million received in 2013 for the same fiscal
period. More so, the gross profit in the same second quarter in 2014 was $8,161 million an increase from $7,721 million from the
previous year (Schenck, 2012). The total operating expenses of the company remained at $4,713 million which was a 0.2 percent change
from the previous year (Schenck, 2012). However, net earnings shot up to 14.2 percent from the $1,795 received in 2013. This placed
the companys EPS at $1.52 million which was 22.6 percent higher than the EPS received in the previous year. According to the NYSE,
the share value of the company opened at 113.89 and closed at 113.61 as of 31st March 2015 (Schenck, 2012).
10
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The home improvement industry has also changed a great deal with 58 percent of the revenues from Office Depot being from
their home allowances. The industry is also highly cyclical. The reason for this is because the home improvement industry is directly
correlated with the housing situation in the country. For this reason, changes in the housing conditions in the country also affect the
company returns.
Mergers and acquisitions are today a common event in the markets as companies come together to form a bigger and stronger
company. The primary motivator of mergers and acquisitions is to increase the companys competitiveness and market share. Mergers
and acquisitions combine the resources and strategies of both companies. The companies, therefore, need to be aware of the legal
ramifications of this move as well as the potential tax implications. Companies that are merging need to come to an agreement on the
people they need in the new company and also the departments they no longer require. They also need to agree on the members from
each company who will be in the board of directors and decide on the best leadership to adopt in the new organization.
Corporate strategies include the various methods adopted by companies as they try to create value for their products and
services as well as remain competitive. In the case of Staples, after the merger, Staples will incorporate two existing Office Depot
directors into their board, increasing the number of board members to 13. In addition, there is a hedge fund that owns a 6 percent stake
in Staples in addition to 10 percent stake in Office Depot (Froeb et al., 2005). Once this is done, the combined company will adopt and
operate under the Staples name. In addition, the proposed chairman will be Mr. Sargent. Also, the companies have closed 15 percent of
their European market in 2012. The company has also adopted a smaller format resulting in the reduction of stores from 24,000 to
12
12,000. Office Depot, on the other hand, has made arrangements to close at least 400 stores in the USA market by 2016 (Soni, 2014).
The company also expects a sales transfer rate of at least 30 percent, which is a 2 percent increase in its store closure plan. Therefore, for
a merger to effectively utilize a common corporate strategy, the individual companies have to break down their initial structure and
adopt a new one that will accommodate their changed status as a new company.
To conclude, the industry is faced with rapid changes taking place at once. Changes in how the companies trade, for example
online retailing, have changed how the companies operate. This fact has resulted in Office Depot closing down over 400 of their stores
worldwide as well as seeking smaller more presentable stores for their operations. This move will save the company operational
expenses. In addition, the market forces of demand and supply have also played a major role in determining the continuity and success
of the companies. For example, during the housing bubble and housing crises.
13
14
When interviewed, the representatives of the two companies claimed that the merger would benefit them both especially because
Office Depot would make Staples bigger. They attributed this to changes created in the industry by not only the big-box retailers but
also the online sales which they believed would make any antitrust concerns controversial (Soni, 2014). In planning a $6.3 billion
merger, Staples and Office Depot assert that their 18 year wait for the deal to get approved a long enough wait. They felt the government
regulators were long overdue in changing the mindset of how consumers buy office supplies (Sokler &Kim, 2013). The office supplies
business has become more competitive than it was two decades back, and the merger was, therefore, a strategic move for the two
companies to capitalize on this (Hosken & Tenn, 2015). The companies also justify this merger claiming that it would benefit consumers
who will now enjoy a wider range of affordable commodities lessening their reliance on other superstores like Amazon, Walmart and
Target (Soni, 2014). They also felt that the current market was flooded by bigger store chains and online competitors that have resulted
in increased competition and reduced prices. This is the reason that has propelled Staples and Office Depot to argue that the proposed
merger is necessary. It is for this reason they feel it will give them the best platform to compete in a new world (Hosken & Tenn, 2015).
To further justify the merger, the representatives admitted that the annual revenue at Office Depot was declining steadily and has
fallen 36 percent in the past seven years. This decline was weighing down heavily on the company, and the merger would, therefore,
help to ward off this continuous decline in the company revenues and profitability. For example, if the merger is approved, it is predicted
that Staples will be able to save at least $1 billion from combining purchasing and marketing costs with Office Depot.
15
Financiers estimate that if the merger goes through, the merged Staples-Office Depot will benefit from the creation of a retailer
at is twice as large, and with $34 billion in revenue and 4,400 stores (Hosken & Tenn, 2015). Hence, the market leader Staples
confirmed that it would acquire the number 2-ranked rival Office Depot in a cash and stock deal to create a combined company with
over 4,000 locations in 25 countries. The company also has annual sales of nearly $39 billion (Sherman, 2015; Warren & Dalkir, 2001).
This merger is, therefore, necessary for the long-term sustainability of these two companies.
16
Below is an analysis of Staples key ratios for the financial years between 2006 and 2015
i)
Profitability
Margins % of Sales
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
COGS
71.48
71.40
71.35
72.94
73.33
73.09
73.06
73.38
Gross Margin
28.52
28.60
28.65
27.06
26.67
26.91
26.94
26.62
SG&A
20.27
20.46
20.58
20.06
20.21
20.02
20.18
20.03
Other
0.08
0.08
0.08
1.06
0.76
0.49
0.26
4.50
Operating Margin
8.17
8.06
7.99
5.94
5.69
6.41
6.51
2.09
0.01
0.05
0.03
-0.56
-0.93
-0.88
-0.68
-1.00
EBT Margin
8.18
8.10
8.02
5.39
4.76
5.53
5.83
1.09
Revenue
R&D
17
Growth
Profitability
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
36.50
33.85
36.00
34.50
34.50
34.50
32.57
160.60
Net Margin %
5.19
5.36
5.14
3.49
3.04
3.59
3.94
-0.86
2.18
2.26
2.22
2.09
1.82
1.78
1.83
1.90
11.32
12.12
11.42
7.31
5.53
6.38
7.20
-1.64
1.73
1.67
1.58
2.34
2.03
2.00
1.91
2.00
Return on Equity %
19.54
20.61
18.54
14.27
11.98
12.86
14.11
-3.21
18.08
19.16
17.55
11.97
9.75
10.83
11.85
-1.22
5.88
7.31
9.40
2.63
Tax Rate %
Return on Assets %
Financial Leverage (Average)
Interest Coverage
Financial Year
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
201
Financial Year
18
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
201
11.28
12.95
6.67
19.16
5.16
1.11
1.94
-2.56
3-Year Average
11.51
11.27
10.27
12.81
10.16
8.21
2.72
0.14
5-Year Average
8.54
11.01
10.81
11.86
10.93
8.83
6.62
4.71
18.02
16.43
14.10
12.48
10.51
8.68
8.79
7.71
16.65
11.41
5.82
-11.39
0.76
13.83
3.49
-68.68
13
3-Year Average
24.43
22.38
11.20
1.47
-1.87
0.54
5.88
-28.28
5-Year Average
21.90
23.55
17.83
11.44
4.19
3.68
2.16
-19.91
10-Year Average
24.41
21.78
19.02
12.72
9.99
12.42
12.35
-2.86
Revenue %
10-Year Average
Operating Income %
Net Income %
Financial Year
19
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
201
17.79
16.69
2.26
-19.12
-8.27
19.40
11.65
3-Year Average
23.21
25.70
12.02
-1.18
-8.80
-3.96
6.93
-1
5-Year Average
69.46
29.73
17.42
10.44
0.84
1.11
0.22
10-Year Average
27.47
24.78
22.49
15.82
8.90
30.90
14.03
19.94
17.86
4.55
-18.12
-9.73
18.63
15.70
3-Year Average
21.34
25.99
13.90
0.30
-8.24
-4.29
7.40
5-Year Average
62.11
37.68
17.09
11.35
1.78
1.56
1.18
10-Year Average
23.11
21.17
19.80
15.24
8.60
28.31
18.03
EPS %
20
Cash flows
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
476.00
-570.00
899.00
-765.00
Cap Ex as a % of Sales
2.84
2.91
2.43
1.64
1.29
1.67
1.53
4.85
3.50
4.60
5.66
7.30
4.23
4.77
0.93
0.65
0.89
1.62
2.40
1.18
1.21
iv)
201
Financial health
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
20.46
17.57
14.08
4.87
10.32
10.50
9.41
10.87
7.51
8.58
9.10
14.34
13.20
14.05
15.14
14.78
22.23
22.86
22.72
18.49
16.48
16.96
18.11
18.84
3.79
3.76
4.51
6.36
5.00
4.99
4.18
6.00
53.99
52.77
50.41
44.06
45.01
46.49
46.84
50.49
Net PP&E
22.91
23.51
23.92
17.61
15.78
15.44
15.49
15.99
Intangibles
21.09
20.10
22.09
34.46
34.00
33.04
33.00
29.36
21
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
2.01
3.62
3.58
3.87
5.21
5.03
4.67
4.16
Total Assets
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Accounts Payable
18.70
17.70
17.27
16.35
15.39
15.87
16.53
15.44
Short-Term Debt
0.04
2.40
0.26
11.33
3.27
8.04
2.35
13.56
6.58
6.21
9.07
11.69
10.77
10.53
3.66
6.54
5.14
0.49
4.22
6.49
32.30
33.21
28.88
36.74
27.57
30.86
30.34
35.98
Long-Term Debt
6.87
3.77
3.79
15.14
11.91
8.16
3.17
3.22
4.05
5.34
23.06
19.22
5.53
5.96
Total Liabilities
42.35
40.20
36.72
57.22
50.63
50.09
47.77
50.10
57.65
59.80
63.28
42.78
49.37
49.91
52.23
49.90
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Taxes Payable
Accrued Liabilities
Other Short-Term Liabilities
Total Current Liabilities
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
Current Ratio
1.67
1.59
1.75
1.20
1.63
1.51
1.54
1.40
Quick Ratio
0.87
0.79
0.80
0.52
0.85
0.80
0.81
0.71
Financial Leverage
1.73
1.67
1.58
2.34
2.03
2.00
1.91
2.00
Debt/Equity
0.12
0.06
0.06
0.35
0.37
0.29
0.23
0.16
Liquidity/Financial Health
vi)
Efficiency rations
22
2006-01
2007-01
2008-01
2009-01
2010-01
2011-01
2012-01
2013-01
12.05
13.04
14.54
21.24
27.64
28.00
29.09
28.81
Days Inventory
52.54
51.04
52.46
48.31
47.83
47.00
47.83
48.42
Payables Period
42.51
41.13
40.23
39.96
43.45
43.95
44.21
41.99
22.08
22.95
26.76
29.60
32.02
31.05
32.70
35.24
Receivables Turnover
30.29
27.99
25.11
17.18
13.21
13.04
12.55
12.67
Inventory Turnover
6.95
7.15
6.96
7.55
7.63
7.77
7.63
7.54
9.57
9.73
9.37
10.37
10.90
11.38
11.84
12.06
Asset Turnover
2.18
2.26
2.22
2.09
1.82
1.78
1.83
1.90
Efficiency
Below is the financial breakdown of the key ratios for Office Depot Company between the years 2005 to
the financial year that ended in December 2014
i)
Profitability
Margins % of Sales
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
Revenue
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
COGS
69.24
68.90
71.00
72.37
72.07
71.14
70.18
69.64
Gross Margin
30.76
31.10
29.00
27.63
27.93
28.86
29.82
30.36
SG&A
28.32
26.30
25.93
28.05
29.90
28.74
29.53
30.00
R&D
Other
-0.09
-0.05
10.24
0.22
0.44
0.66
23
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
Operating Margin
2.44
4.89
3.11
-10.66
-2.18
-0.32
0.29
-0.29
0.09
-0.04
-0.16
-0.22
-0.38
-0.17
-0.01
-0.42
EBT Margin
2.53
4.85
2.95
-10.88
-2.56
-0.49
0.28
-0.71
Margins % of Sales
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
24.27
29.04
13.74
Net Margin %
1.92
3.44
2.55
-10.20
-5.16
-0.70
0.52
-1.03
2.22
2.37
2.25
2.31
2.39
2.46
2.61
2.59
Return on Assets %
4.26
8.15
5.72
-23.62
-12.34
-1.73
1.36
-2.66
2.23
2.52
2.35
3.87
6.22
6.57
5.75
6.06
Return on Equity %
9.18
19.30
13.90
-66.52
-58.34
-11.03
8.36
-15.72
8.31
16.56
12.63
-46.07
-31.14
-2.32
5.72
-3.11
-22.10
-3.74
0.03
1.98
-0.09
Profitability
Tax Rate %
Interest Coverage
iii)
Growth
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
2013-12
5.27
5.13
3.44
-6.65
-16.22
-4.21
-1.23
-6.91
3-Year Average
7.93
6.70
4.61
0.50
-6.82
-9.18
-7.45
-4.15
5-Year Average
4.30
6.12
6.46
3.24
-2.19
-4.02
-5.21
-7.18
2005-12
Revenue %
24
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
2013-12
10.39
9.48
8.74
4.88
1.70
0.05
0.30
-0.60
-34.33
110.75
-34.07
3-Year Average
-11.36
15.97
-3.01
5-Year Average
10.26
15.66
-0.65
-45.98
10-Year Average
3.61
11.85
4.79
-20.95
-18.39
88.51
-23.35
3-Year Average
-4.13
23.16
5.65
5-Year Average
40.88
20.75
4.95
-28.61
10-Year Average
7.54
14.87
9.50
-7.15
-17.92
105.75
-20.11
3-Year Average
-3.89
26.70
10.50
5-Year Average
40.31
22.08
7.85
-34.25
10-Year Average
4.63
12.87
8.26
-10.40
2005-12
10-Year Average
Operating Income %
Net Income %
EPS %
iv)
Cash flow
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
201
25
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
-155.00
-170.00
Cap Ex as a % of Sales
1.83
2.29
2.97
2.54
1.08
1.46
1.13
2.63
3.22
-0.32
0.69
1.36
0.29
0.60
1.37
0.94
-0.12
-0.07
-0.28
-0.75
0.72
v)
201
Financial health
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
11.53
2.64
3.07
2.96
13.49
13.73
13.42
16.73
Accounts Receivable
20.20
22.53
20.83
23.84
22.93
21.09
20.30
20.04
Inventory
22.30
23.74
23.67
25.28
25.62
27.00
26.98
26.20
3.84
3.67
3.63
7.20
3.52
4.44
3.85
4.26
57.88
52.59
51.21
59.27
65.56
66.27
64.55
67.22
Net PP&E
21.51
21.69
21.90
29.56
26.13
25.32
25.10
21.35
Intangibles
14.45
18.25
19.16
0.91
0.92
0.90
2.28
2.02
6.16
7.48
7.74
10.27
7.39
7.51
8.06
9.40
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
21.71
23.77
21.93
23.76
22.11
23.64
23.37
23.31
0.78
0.73
2.87
3.64
1.22
1.58
0.86
4.34
0.17
0.14
0.06
0.17
0.13
Accounts Payable
Short-Term Debt
Taxes Payable
26
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
16.07
18.64
16.13
22.27
26.18
26.00
23.76
23.23
1.93
2.06
0.05
40.48
45.20
40.98
49.84
49.65
51.29
48.16
51.01
Long-Term Debt
9.33
8.69
8.37
13.07
13.55
14.44
15.25
12.10
5.27
6.38
8.16
11.21
20.71
19.05
19.20
20.40
Total Liabilities
55.08
60.27
57.50
74.13
83.92
84.78
82.61
83.51
44.92
39.73
42.50
25.87
16.08
15.22
17.39
16.49
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Accrued Liabilities
Other Short-Term Liabilities
Total Current Liabilities
Liquidity/Financial Health
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
Current Ratio
1.43
1.16
1.25
1.19
1.32
1.29
1.34
1.32
Quick Ratio
0.78
0.56
0.58
0.54
0.73
0.68
0.70
0.72
Financial Leverage
2.23
2.52
2.35
3.87
6.22
6.57
5.75
6.06
Debt/Equity
0.21
0.22
0.20
0.51
0.84
0.95
0.88
0.73
vii)
Efficiency ratios
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
32.41
32.98
35.17
34.84
35.72
32.71
29.33
28.78
Days Inventory
51.11
51.53
54.26
53.05
53.89
54.83
53.88
53.85
Payables Period
54.91
50.92
52.19
49.46
48.65
47.67
46.94
47.25
28.62
33.58
37.23
38.43
40.96
39.87
36.27
35.37
Efficiency
Efficiency
Receivables Turnover
Inventory Turnover
Fixed Assets Turnover
Asset Turnover
27
2005-12
2006-12
2007-12
2008-12
2009-12
2010-12
2011-12
2012-12
11.26
11.07
10.38
10.48
10.22
11.16
12.45
12.68
7.14
7.08
6.73
6.88
6.77
6.66
6.77
6.78
10.29
10.97
10.30
9.21
8.57
9.56
10.33
11.12
2.22
2.37
2.25
2.31
2.39
2.46
2.61
2.59
28
Staples stood at approximately 12 percent as of March 2015 to $16.73 (Sherman, 2015). However, on the same day stocks at Office
Depots closed below the offer price, at $9.48.
6.2 Estimated Valuation of the merger
Valuation refers to a technique that quantifies the value a given item should be exchanged for today, with consideration to its
future benefits. These can be calculated using the transaction comparables, trading comparables, discounted cash flow analysis and the
sum of the parts valuation (Soni, 2014). The valuation also helps companies to determine how much a company is worth during a
merger or acquisition. Using the valuation multiples of 6.5x-7x, the estimated value of the combination stand at ~$19.10-$21.70 (Soni,
2014). This value was ~23 %-40% of the company compared to the current value of the companies singly. The enterprise value weights
of ODP stood at ~$5-$5.7 billion including the companys debt and ~$4.3-$5 billion excluding debt. As a result, the estimated share
price will stand at ~$77.89-$9.15, which is a premium of 205-40% compared to the initial $6.55 percent as of financial year ended
December 2014 (Soni, 2014). Below is a graph showing Staples Annual Office Supplies sales for the years 2010 up until financial year
that ended in 2014.
29
30
(Soni, 2014; Warren & Dalkir, 2001). This will be made more effective with the closure of several stores worldwide especially in shared
catchment areas, coupled with the reduced square footage (Sherman, 2015). However, despite this, the margins of SPLS are better
compared to Office Depots margins (Hosken & Tenn, 2015). There were also a lot of o synergies due to the ODPs merger in 2013. This
will, therefore, result in the incremental EBITDA of $0.8-$1 billion for the new combined company. This is illustrated below;
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32
The advantages attributed to this merger included that the companies combined would have a stronger bearing on the market.
They also argued that their presence would help to increase completion in the industry eliminating the dominance of Amazon and
Walmart among others. The merger would also increase the companys profitability as well help them save on expenses. For example,
Staples was documented to have calculated their savings to at least $ 1 billion as a result of the merger. This will result from the layoffs
and also the closure of several physical stores in the locations both companies have already established branches. This will substantially
lessen the operational costs of the company.
The Principle of the merger or acquisition is to create shareholder value over the value of the two companies put together. Hence,
the rationale for this merger is met since their coming together will culminate in the creation more competitive and cost effective
company that can survive the economic upheaval. These companies, therefore, will gain a greater market share. Therefore, although the
acquisition has been long overdue and could go a long way towards boosting the profitability and market share of both companies, as
well as their competitiveness, the acquisition will cost Staples more money that it currently has unless if explores other funding options.
References
Boston School of Management. (2014). Techniques in Finance &Valuation. Boston: Boston
University.
Froeb, L., Tschantz, S., & Werden, G. J. (2005). Pass-through rates and the price effects of
SSRN 2552548.
Financials:
http://financials.morningstar.com/income-Statement/is.html?t=SPLS®ion=usa&culture=en- US
Morning star. (2015). Office Depot Inc (ODP). Retrieved April 3, 2015, from Morning Star
http://financials.morningstar.com/ratios/r.html?t=ODP
Financials:
33
post .
Soni, P. (2014, December 23). Why Is Starboard Interested In Staples And Office Depot? Market Realist
Warren-Boulton, F. R., & Dalkir, S. (2001). Staples and office depot: an event-probability case
Organization, 19(4), 467-479.
White, L. J. (2002). Staples-Office Depot and UP-SP: An antitrust tale of two proposed mergers.
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