In the four months since announcing the sale of Black & Decker Corp. to Connecticut-based rival The Stanley Works, executives have sought to prepare and reassure employees about the merger, sending out "Integration Updates" and hosting forums where questions could be posed to corporate leaders.
In the merger-speak they developed, the integration teams have been referring to Monday as "Day 1."
Monday will be first day of the combined company - to be called Stanley Black & Decker - and also the end of Towson-based Black & Decker as a stand-alone company after a 100-year history in toolmaking. It's a pivotal moment, put into motion by shareholder votes and the closing of the $4.5 billion deal on Friday.
Black & Decker, known for brands sold in 100 countries, will now be folded into the new company as a wholly owned subsidiary. In the place of the Maryland manufacturer that gave consumers the first portable electric drill will be a company that has headquarters in New Britain, Conn., with a new name and new management.
Moving forward, that means huge changes to the company's inner workings, including basic operations such as billing and shipping, as well as far-reaching restructuring that's expected to result in nearly 4,000 layoffs from a global work force of 38,000 and the shuttering of redundant operations. Many of the 250 corporate workers at Black & Decker's Towson headquarters are expected to be let go, though a time frame hasn't been set.
The merger should pay off handsomely for shareholders and for some executives, including Black & Decker's chief executive Nolan D. Archibald, who has been one of the longest-serving CEOs of a Fortune 500 company, with 24 years at the helm. His compensation over the next three years, including bonuses tied to achieving cost-cutting targets, could total $89 million. Other top executives stand to receive millions of dollars in severance and benefits.
Archibald, who declined to be interviewed for this article, recently spoke about the deal to employees gathered at Goucher College.
"I don't believe there is another company in the world who fits quite together like Stanley and Black & Decker," he said, according to a transcript provided in regulatory filings.
"There is no way to put a good face on what will happen to corporate. There can only be one corporate headquarters," he added. "However, for the vast majority of Black & Decker employees who will continue with the combined company, this will be very good for you. You will have the professional opportunities that result from being part of a much larger company."
So far, the merger of the tool titans has been well-received on Wall Street. The deal offered shareholders 1.275 shares of Stanley stock for each share of Black & Decker stock, representing a 22 percent premium. And since the deal was announced, Stanley stock has jumped 30 percent, while the value of Black & Decker has shot up nearly 60 percent.
But the deal also has come under regulatory scrutiny in the past week. The flap stemmed from Archibald's real estate partnership with board member M. Anthony Burns; they are co-owners of a luxury golf community in Utah. But that fact wasn't disclosed by Black & Decker until it fielded inquiries in recent days.
Some analysts questioned Burns' role in reviewing the Stanley deal and Archibald's pay package as an "independent" director on a three-person committee. And the New York Stock Exchange chided Black & Decker, saying it should have considered their partnership when deeming Burns independent.
The episode was part of a "pattern of sloppy corporate governance that translates ... into the answer to the question: 'Why is Black & Decker the selling and not the surviving company?' " said Douglas M. Schmidt, chief executive of financial services company Chessiecap Inc., who first reported the partnership on the Web site Citybizlist.
Archibald's compensation also has come under fire. As part of the merger, he negotiated for himself a hefty "cost synergy bonus" worth up to $45 million and tied to his role in cutting costs, which has drawn criticism from corporate governance and compensation experts. In addition, with salary and other pay, Archibald's total compensation over the next three years would total $89 million, according to Mark Reilly, a compensation expert based in Chicago.
"It's really high," Reilly said of Archibald's merger-related compensation. "It's sort of like being paid a $45 million bonus for meeting your expectations. You're getting paid for just doing your job, not even exceeding expectations. He's getting paid $45 million to lay off people. ... Forty-five million is really out there."
In pitching the merger to Black & Decker employees at Goucher, Archibald told the crowd that the deal made sense for shareholders, who would benefit from achieving $350 million in cost savings from the merger, and for the two companies, which sell complementary products in similar markets. Black & Decker, with its strong presence in Latin America, would help Stanley products gain a foothold in a new part of the world, he said.
Archibald didn't address his pay then, but in response to a shareholder who accused him of greed at the merger vote Friday, he said the merger had "nothing to do with greed" and was in shareholders' interests.
He also said at Goucher that the union of the two companies was decades in the making. Three times in the past 28 years, a Stanley Works CEO had pitched the idea of a merger to Black & Decker, but the timing was never right - until last June, when Archibald and Stanley CEO John Lundgren met for lunch in New York City to discuss a deal, according to Archibald.
To many financial analysts, the combination makes sense. Both companies have powerful brand recognition, along with sophisticated manufacturing and marketing muscle. Together, the companies can sell power tools, hand tools, security and fastening systems virtually all over the world, with growth coming in the emerging markets of Latin America, the Middle East and Asia.
"I think it's a great deal," said Jim Lucas, investment analyst and managing director at Janney Montgomery Scott LLC in Philadelphia. "I was skeptical at the beginning, but after spending a lot of time talking to the Stanley folks about it, they have a plan in place. They have the people in place to execute the plan."
Analysts warn, however, that the biggest risks will come in blending the two large companies. Top executives at both companies now have to move quickly to cut costs, merge operations and prove to Wall Street that they can make a complex acquisition work for employees, customers and shareholders.
Sam Darkatsh, an analyst with Raymond James, noted in a recent research paper that the acquisition represents a change in strategy for Stanley, which had focused on building its security business and decreasing its reliance on the consumer and construction products sold by mass retailers.
But Lucas said that Stanley Works has had experience over the past decade in acquiring and integrating large companies. "They know how to extract cost from a business while still growing and, at the same time, generating a lot of cash," he said.
With restructuring, the company plans to shut down overlapping plants and distribution centers for an estimated savings of $45 million, though it has not released details on how that will be achieved. The company anticipates saving an additional $95 million in corporate overhead costs, in large part through shutting down functions and job cuts in Towson. Leveraging buying power and combining sales forces could save another $210 million.
Already, at least five top executives have been told their jobs will be eliminated, some with Black & Decker careers spanning more than two decades. They will be paid about $40 million in total severance and benefits, according to regulatory filings. Other layoffs are likely to come in middle management and sales as the company eliminates duplicate roles.
But Black & Decker's vaunted Power Tools division, which accounted for three-quarters of the company's revenue, will remain based in Towson. That division will now be part of Stanley Black & Decker's new construction and do-it-yourself group to be headed by Jeff Ansell, a Stanley executive who started his career at Black & Decker.
Ansell will be focused in the coming weeks on integration and on "communicating with our talented employee base about the combined vision and strategy for the new company while ensuring the business is stabilized and positioned to execute on our immediate objectives," Tim Perra, a Stanley spokesman, said in an e-mail.
Officials with both companies said it is too early to discuss the timing or extent of layoffs in Towson.
The new company will be heavily weighted with Stanley leadership. While Archibald will serve as executive chairman, only three of the top 18 executives will be drawn from Black & Decker. Going down a rung on the corporate ladder, 15 of the new company's 54 positions will be filled by Black & Decker executives. Nine of Stanley's directors will be joined by six Black & Decker directors.
For years under Archibald, Black & Decker pursued a strategy of inventing new products to bring to market. A lot of that innovation happened in Maryland, with the company ranked third in patents granted in Maryland from 2004 to 2008, and it has become known for new products, including the Dustbuster and DeWalt cordless drills.
Another hallmark has been the company's customer service. For instance, the company is known for having teams of people give instructional classes to merchants selling the products.
And some people don't see that changing.
"Their customer service has been good over the years, and they've obviously been a leader in new technology," said R. Bentley Offutt, a securities analyst with Offutt Securities in Cockeysville. "My guess is that will continue with Stanley Works."