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- 1. MERGER INTEGRATION TEAM 33 JANUARY 6, 2014
- 2. Overview ◦ Key Steps for Office Depot/Max: ◦ Appoint key staff ◦ $600M Cost savings ◦ Closing redundant stores Overview Current Situation Risks Operations Structure Branding Integration Details
- 3. Star Alignment Model Strategy • Convenient • Both retail & online presence • Enhance simplicity Structure • Two way communication • Joint decision making Culture Team oriented Family atmosphere Rewards • Stock-based compensation (executives) • Group-based compensation (employees) Overview Current Situation Risks Structure • Flat structure Human Resource Management • External HR for hiring during merger • Hire internally first Operations Structure Branding Integration Details
- 4. 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 Risks Operations Structure Branding Integration Details
- 5. Office Depot Current Situation ◦ ◦ ◦ ◦ ◦ Negative profit International sales sliding Operating costs increasing Minimal flexibility in financing gap Lacking innovation Overview Current Situation Risks Operations Structure Branding Integration Details
- 6. Office Max Current Situation ◦ ◦ ◦ ◦ Decline in sales – in both retail and contract segments Low margins Increasing delivery expenses Increasing incentive compensation Overview Current Situation Risks Operations Structure Branding Integration Details
- 7. External Risks of Both Companies ◦ ◦ ◦ ◦ ◦ ◦ ◦ Reliance on commodities Seasonality Foreign currency fluctuations Competition Extremely cyclical Supply>Demand Technology Overview Current Situation Risks Operations Structure Branding Integration Details
- 8. Internal Risks of Both Companies Office Depot ◦ Loss of Government contracts Office Max ◦ Loss of Health Care contracts Both ◦ Loss of key talent Overview Current Situation Risks Operations Structure Branding Integration Details
- 10. Current Actions We Support ◦ 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 Overview Current Situation Risks Operations Structure Branding Integration Details
- 11. Additional Actions We Suggest ◦ ◦ ◦ ◦ 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 Overview Current Situation Risks Operations Structure Branding Integration Details
- 13. Executive Team Roland C. Smith President North America - John Kenning Overview Steve Schmit – President International Current Situation Executive CFO and Vice Pres – Steve Hare Risks CPO – Michael Allison Operations Structure CLO (legal) – Elisa Garcia Branding Strategy and Innovation Officer – James Barr Integration Details
- 14. President of North America ◦ 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 Overview Current Situation Risks Operations Structure Branding Integration Details
- 15. Strategy and Innovation Officer ◦ 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 Overview Current Situation Risks Operations Structure Branding Integration Details
- 16. Leadership Team Leadership Team Executive Vice President of Retail – Juan Guerrero Contract Sales – Steve Calkins Overview Ecommerce – Mike Kirschner Current Situation Merchandising – Ron Lalla Risks Marketing – Tim Rea Operations Supply Chain – Larry Hartley Structure Real Estate – Rob Koch Branding Global Chief Information Officer – Todd Hale Integration Details Integration – Deb O’Connor
- 17. Branding • Revitalize company • Customers: Not just a one-time purchase • Sense of unity for employees/executives Overview Current Situation Risks Operations Structure Branding Integration Details
- 18. Financing Debt to Equity Ratio Return on Equity 94% 16.5% Finance $200 Million with Equity
- 21. 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 Risks Operations Structure Branding Integration Details
- 22. 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 Risks Operations Structure Branding Integration Details
- 23. 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 Risks Operations Structure Branding Integration Details
- 24. 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 Risks Operations Structure Branding Integration Details
- 25. Thank you for your time. CLOSING REMARKS
Editor's Notes
- At 4 dollars per share 500,000 shares