Robertson Tools Company Value Analysis

Robertson Tools Company value analysis

Monmouth Inc. is a leading producer of engines and massive compressors used to force natural gas through pipelines and oil out of wells. It is has dependence on sales to the oil and gas industries, the earnings of which is fluctuated owing to cyclical nature of heavy machinery and equipment sales. Anyway, the company’s amount of earnings growth and sales are above average in long-term view. From the last three acquisitions the company adhered to only leading companies in their respective market segments. The fourth company on the list of acquisition was Robertson Tool Company.

Robertson Tool Company is one of the largest domestic manufacturers of cutting and edge hand tools with wide distribution system, but relatively poor in sales and profit performance. So Monmouth is eager to merge for the potential profits.

Under the prism of view without strong financial calculation, Monmouth better try to gain control of Robertson Tools. When both companies will merge, the cost of it most probably will be absorbed by the strategic fitness the result of which is possible profits and synergies with created value of transaction.

First of all, the sales force in Monmouth easily overlaps with Robertson which provides the possibilities of decreasing the operation costs. Further, other costs can be lowered to experience higher profits are the costs of goods sold which can be reduced from 69% to 65% of sales and also the advertising and sales expenses from 22% to 19%. Moreover, from the side of source of earning the two companies perfectly complement each other, Robertson’s strength is in the industrial market and its strong European distribution system, using it by Monmouth will push the product presence and sales in these markets.

If Robertson Tools Company its Managing Family with Directors and Officers is in between decision whether to go with Monmouth or Simmons, obviously they should choose Monmouth, as a merger with Simmons will lead to giving away all independence and becoming just another operating division after serious

...