ing case comp
TRANSCRIPT
MERGER INTEGRATIONT E A M 3 3
J A N U A RY 6 , 2 0 1 4
Overview◦ Key Steps for Office Depot/Max:
◦ Appoint key staff◦ $600M Cost savings◦ Closing redundant stores
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Star Alignment Model
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Strategy• Convenient• Both retail & online presence• Enhance simplicity
Structure• Flat structure
Human Resource Management• External HR for hiring during merger • Hire internally first
Rewards• Stock-based compensation (executives)• Group-based compensation (employees)
Structure• Two way communication• Joint decision making
CultureTeam orientedFamily atmosphere
Agenda◦ Current Situation
◦ Office Depot◦ Office Max
◦ Risks◦ External◦ Internal
◦ Operations◦ Organizational Structure◦ Branding◦ Integration Details
◦ Profitability and Growth◦ Potential Issues with Merger Integration◦ How to Mitigate Merger Integration Issues
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Office Depot Current Situation ◦ Negative profit◦ International sales sliding◦ Operating costs increasing◦ Minimal flexibility in financing gap◦ Lacking innovation
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Office Max Current Situation
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
◦ Decline in sales – in both retail and contract segments◦ Low margins◦ Increasing delivery expenses◦ Increasing incentive compensation
External Risks of Both Companies
◦ Reliance on commodities ◦ Seasonality ◦ Foreign currency fluctuations◦ Competition◦ Extremely cyclical◦ Supply>Demand◦ Technology
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Internal Risks of Both CompaniesOffice Depot
◦ Loss of Government contracts
Office Max◦ Loss of Health Care contracts
Both◦ Loss of key talent
Overview Current Situation Operations Structure Branding Integration
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Operations
Overview Current Situation Operations Structure Branding Integration
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Current Actions We Support
Overview Current Situation Operations Structure Branding Integration
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◦ Combining the suppliers (North America) enable us greater flexibility with AP and better prices
◦ Harmonization of products◦ Combine
◦ Distribution and delivery networks (North America)◦ Sales networks◦ Advertising◦ E-commerce programs◦ Combine/Close Stores create less brick and mortar costs
◦ Eliminate redundancies in support and sales functions ◦ Standardize processes lowers technological costs
Additional Actions We Suggest
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
◦ Reduce SKUs to consolidate product line◦ Create online advertising strategy ◦ Close down underperforming global stores◦ Focus on establishing more long-term government and healthcare
contracts to ensure sales◦ Integrate Office Depot and Office Max loyalty programs
Organizational Structure
Executive Team
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Roland C. Smith
President North America - John
Kenning
Steve Schmit – President
International
Executive CFO and Vice Pres – Steve
Hare
CPO – Michael Allison
CLO (legal) – Elisa Garcia
Strategy and Innovation Officer –
James Barr
President of North America
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
◦ John Kenning◦ Diverse background in leading regional divisional◦ Mr. Kenning has more than 25 years of experience leading a
variety of types of teams at large enterprise companies◦ Championed Nortel during transitional period◦ OMX Legacy – balances against multiples ODPs on executive for
MOE culture
Strategy and Innovation Officer
Overview Current Situation Operations Structure Branding Integration
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◦ James Barr◦ Diverse work experience at different types of companies◦ Successful in developing profitable e-commerce strategies◦ OMX Legacy – balances against multiple ODPs on executive for
MOE culture
Leadership Team
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Leadership Team
Executive Vice President of Retail
– Juan Guerrero
Contract Sales – Steve
Calkins
Ecommerce – Mike
Kirschner
Merchandising – Ron Lalla
Marketing – Tim Rea
Supply Chain – Larry Hartley
Real Estate – Rob Koch
Global Chief Information
Officer – Todd Hale
Integration – Deb
O’Connor
Branding
• Revitalize company
• Customers: Not just a one-time purchase
• Sense of unity for employees/executives
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
FinancingDebt to Equity Ratio Return on Equity
94% 16.5%
Finance $200 Million with Equity
Projected Income Statement
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Projected Balance Sheet
Are the Projections Realistic?• Synergies Projections:• Assuming synergies occurring internationally• Realistic time frame• Huge overlap in contract and retail business’ in North America• Same customer base, distribution channels and supplier types• Similar product, support and sales functions• CEO used closing stores and combining stores in past to reduce costs• Both increasing focus on e-commerce platform• Both use media, catalogue and insert advertising• Ability to eliminate redundancies, standardize processes and harmonize
products
Overview Current Situation Operations Structure Branding Integration
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Are the Projections Realistic?• Sales Projections:• Weakened demand for office supplies and technology sales in commercial
segment and projected to keep declining• Both not doing well internationally
• Trouble with execution and economic environment abroad • Staples might take advantage of disruption occurring while merging
companies and steal more market share • High possibility of losing more competition to Amazon and technological
substitutions• Sales projections likely overstated
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Potential Issues with Merger Integration
◦ Behaves like two separate entities ◦ No clear understanding of integration plan ◦ Job losses◦ Potential backlash from Union ◦ Uneven dividend payment ◦ Market share threat ◦ Over-reliance on few suppliers ◦ Risk of unsuccessful online platform
Overview Current Situation Operations Structure Branding Integration
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How to Mitigate Merger Integration Issues
◦ Competitive Edge ◦ Compete with online platforms Use Loyalty Program Integration
◦ Behaves like two separate entities ◦ No clear understanding of integration plan ◦ Job losses◦ Potential backlash from union ◦ Uneven dividend payment ◦ Market share threat ◦ Over-reliance on few suppliers ◦ Risk of unsuccessful online platform
Overview Current Situation Operations Structure Branding Integration
DetailsRisks
Thank you for your time.CLOSING REMARKS