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Black & Decker Case

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BLACK & DECKER
Black & Decker Corporation (B&D) tried to run a diversification strategy. During the 1980’s Black and Decker had established themselves as a leader in the power tool industry. However, they had a feeling that that the market for such tools was maturing to the point where expansion within the industry would provide little or no additional revenues so they decided to diversify. Black and Decker began their expansion operation by acquiring General Electric’s housewares business for $300 million in 1984. The success of the GE deal, and the reorganization efforts of their new CEO Nolan Archibald, led Black and Decker to continue on this path of acquisitions and diversification in other areas. B&D then tried to acquire American Standard Inc. which had an impressive $127 million profit in 1987 and was in excess of the $70 million that was generated by B&D. But then, the acquisition was unsuccessful. Even after the failure, they did not hold back from their diversification strategy and acquired Emhart Corporation, a diversified manufacturer of industrial product, for a $2.8 billion in March 1988, a price that was over by 33% of the Emhart’s preannouncement value. The deal was considered unfavorable for B&D because its stock price dropped 15 points after the announcement of the acquisition.
With this acquisition, B&D incurred a debt of &4 billion. So from 1993 – 1996, they started to sell the segments of Emhart that did not prove to be strategic parts of the acquisition. In this way they reduced their debt by more than 25%. By 1997, Black & Decker was able to meet its liquidity requirements and management chose to amortize the costs on a straight-line basis for the next 40 years.
B&D created Market Segmentation for two distinct groups of buyers for power tools and classified them as professional users and...

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