Monmouth Case Write Up

If I were Harry Vincent, I would try to gain control of Robertson Tool. Acquisition of Robertson Tool fits well with Monmouth’ diversification strategy and will allow them to broaden markets and be less sensitive to the general economic conditions. Monmouth was evaluating companies based on three criterion that was important to them for acquisitions - scope for Monmouth to become a major player in that industry, fairly stable industry with broad market for products and leading company.

Operationally, Robertson meets all three criteria established by Monmouth for acquisitions. It’s a leader in its two main product areas, holding a 50% share of the $75-million clamps and vises market and a 9% share of the $200-million scissors and shears market. It has great distribution system with coverage all over the world. Robertson is believed to have the strength to grow as fast as other companies in terms of sales in its industry. More importantly, it could provide Monmouth the diversification of product line. The expansion in the hand tool market would lessen the volatility of Monmouth caused by the cyclical nature of heavy machinery and equipment sales. Besides, Monmouth could help Robertson Tool reduce its cost of goods sold and selling expenses substantially, due to the elimination of sales and advertising duplication and excessive number of products. The two companies would also be complementary since they each dominate in the industrial and consumer market.

Financially, because the family-run management could not translate the competitive strength into earnings, Robertson had been under a poor performance. The low sales growth rate and profit margin made the firm’s stock price trading near its lowest point. The low P/E ratio indicates not many investors are interested in it. All these gave Monmouth a very good opportunity to make the acquisition.

Taking the takeover fight into account, Monmouth should take this chance with no hesitation. Unwilling