A narrative. The year 1998 was a tumultuous year of market consolidation in the consumer software arena. "One day we could have an interactive Barbie or interactive Reader Rabbit. The company grew rapidly in the 1990's through acquisitions, but it was often a favorite of short- El Segundo, California Speaking about M&A failures and not mentioning this transaction would be like interviewing Neil Armstrong and not mentioning the moon. One of the few women leading a Fortune 500 company, she assumed near-iconic status as a role model for other women. Barad said that fourth-quarter orders from retailers such as Toys R Us unexpectedly fell by $350 million after the Thanksgiving weekend. Google thought so poorly of its new handsets that it contracted others, including Samsung and LG, to develop its Nexus handsets. Sensing a move away from traditional toys towards video game consoles, Mattel felt that the Learning Company would give it a software platform to build on. In September 2000, MaRel announced the sale of the Learning Company unit, for almost no cash and the right to a share of the unit's future . pink mold on camembert Mattel has acquired 11 companies. It ultimately ended up paying US$50 billion for the acquisition, making one wonder where the financial due diligence was when it was needed most. Deposed Chief Executive Jill Barad pushed Mattel to acquire the Cambridge, Mass., company last May for $3.6 billion in an attempt to sharpen its high-tech product line. Platinum Equity is led by one of his former employees, Alec Gores youngest brother, Tom Gores. You can take two fading companies, like KMart and Sears Roebuck, merge them, and youll have an even bigger problem than the one you started with. With smartphones, and shortly after tablets, slowly beginning their rise to ubiquity, it was vogue for the biggest players in technology to announce that they would soon be producing their own handset devices. Barad left in February, after a rocky three-year run at Mattel. Pending approval by the Securities and Exchange Commission (SEC), the merger should be finalized this March. "Because of TLC we can merge that all together and be more aggressive.". This is Mattels 1st transaction in Iowa. That scenario seems unlikely, given that Mattel has tried since April to sell the division. However, within a year of its acquisition, Mattel started blaming the acquired company for . as Reader Rabbit, Carmen Sandiego, Riven and Myst. C6. Terms of service Privacy policy Editorial independence. Shares of The Learning Company (NYSE: TLC) fell 1 15/16 to 26 3/8 and Mattel (NYSE: MAT) plunged 20 percent to 23 11/16. That accounting move pushed the total order shortfall to $500 million, but analysts said it should give Mattel a brighter start for 1999. Lessons from Merger and Acquisition Analysis; The Dark Side of Leadership: Troubling Times at the Top / 1; Panic, Prosperity, and Progress Founded in 1807, John Wiley & Sons Is the . The 33 price is about a 16 percent premium over Shares took a hit after Mattel said sales will be flat this year as. Theres more than one way to destroy value, as the list which follows will testify. Do Not Sell or Share My Personal Information. concerned about Mattel shares holding value. mat A total of 2 acquisitions came from private equity firms.It has also divested 2 assets.. Mattel's largest acquisition to date was in 1998, when it acquired The Learning Company for $3.8B. Here's a list of 10 notorious failed mergers that I've evaluated in one way or another: AOL/Time Warner, HP/Compaq, Alcatel/Lucent, Daimler Benz/Chrysler, Excite/@Home, JDS Uniphase/SDL,. 0000004973 00000 n 8 a.m. 7 p.m. The Learning Company, for $3.5 billion in 1999." . 0000006073 00000 n This does have a ring to it. Observers say Learning Co. would give Mattel a hefty edge in its ongoing battle with Hasbro Inc., the No. For further information, see Guiding Principles on Independence and Objectivity. 0000002047 00000 n and the mid-1990s geek obsession "Myst," but it hasn't delivered a killer title in several years. Now Mattel sees 1998 revenue flat with a year ago with earnings projected HVMs0 uZO\VlZ]I}i.Oo4 The doll line that celebrates its 40th anniversary in 1999 will finish the year on a downturn, the first time in more than a decade. that plagued PC makers last year and the first half of this year. Bank of America had basically acquired bad debt for US$2 billion. Under the terms of the deal, each share of The Learning Company (chart) %PDF-1.3 % But this second part of the equation - making high-quality handsets - has been the undoing of dozens of companies in the telephony industry. Mattel and TLC intend to exploit the combined company's reach, O'Leary said in an earlier conference call. If the property doesnt sell within five years, during which time Mattels share of a sale reportedly drops, Gores will give Mattel a percentage of the companys value at that time. The terms of the Merger are set forth in an Agreement and Plan of Do Not Sell or Share My Personal Information. You may occasionally receive promotional content from the Los Angeles Times. California Consumer Products with Acquisitions, California Consumer Products with Divestitures, Recently Acquired Consumer Products Companies, Recently Sold Consumer Products Companies, Recently Acquired United States Companies, M&A research that takes seconds (not all afternoon), Better understand your customers and prospects. This is a BETA experience. When Google made its move for Motorola in 2012, to many, a transaction between the two made perfect sense from a strategic perspective: Googles Android operating system was already the second biggest player in the market, and acquiring Motorola would give it the opportunity to develop high-quality mobile handsets. The Learning Company was divested to a consortium of buyers in 2000. O'Leary said that children's toys will be much more interactive as technology becomes more advanced and PCs become cheaper. The deal is just one avenue that Mattel is exploring because consumers are buying more nontraditional toys such as electronic and computer games. "One of the assets we have is that as a combined entity we will ship over 50 million CDs worldwide. %PDF-1.3 % The terms of this deal make it quite clear how important it was to this board and this management to get out from underneath this company, said Sean McGowan, the director of research for Gerard Klauer Mattison in New York. This final pricey deal ultimately led to the ouster of one of the 1990's . Gartner Terms of Use Without an understanding of the landscape, the danger existed that the participants would overpay. HTn0EYTEj{HY;cT]3Apw64^A8w`{3/6 |N3{t8 Guiding Principles on Independence and Objectivity. This is Mattels largest (disclosed) transaction. By clicking the "Continue" button, you are agreeing to the trailer << /Size 112 /Info 67 0 R /Root 72 0 R /Prev 202859 /ID[] >> startxref 0 %%EOF 72 0 obj << /Type /Catalog /Pages 66 0 R /FICL:Enfocus 68 0 R /Outlines 75 0 R /PageMode /UseOutlines /OpenAction 73 0 R >> endobj 73 0 obj << /S /GoTo /D [ 74 0 R /FitH -32768 ] >> endobj 110 0 obj << /S 69 /T 189 /O 235 /Filter /FlateDecode /Length 111 0 R >> stream 0000009511 00000 n Join your peers for the unveiling of the latest insights at Gartner conferences. Sales were strong into the Thanksgiving weekend, Barad said, but everything came to a screeching halt as inventory-conscious retailers stopped placing orders. Gartner is a registered trademark of Gartner, Inc. and its affiliates. Connect directly with peers to discuss common issues and initiatives and accelerate, validate and solidify your strategy. Leaders can store and control access to documents, assign and prioritize tasks, as well as communicate with team members and clients - all on the platform! Shares of The Learning Company (NYSE:TLC) fell 1 15/16 to 26 3/8 and Mattel (NYSE:MAT) plunged The Company's most targeted sectors include consumer products (60%) and digital media (10%). Like PC makers found out, margins are squeezed as just-in-time inventory becomes the norm. Gores Technology, led by Alec Gores, is a privately held Los Angeles investment group, which focuses on taking over software companies or divisions, primarily those shed by larger corporations. Just think of where some of these companies could have better invested that money. 0000003118 00000 n 19.99161-6303. heartland cyclone problems. 0000002867 00000 n Clients receive 24/7 access to proven management and technology research, expert advice, benchmarks, diagnostics and more. 2022Gartner, Inc. and/or its affiliates. Sign up for the California Politics newsletter to get exclusive analysis from our reporters. The plan to . If Gores resells the company within a six-month period, Mattel will reportedly share half of the proceeds. Baskin-Robbins adds a hint of waffle, and voila, Federal Reserve officials sound warnings about higher rates. But other observers suggested that retailers will continue to order more toys if consumer demand continues to be strong. Still, the parameters of the deal indicate The Learning Company could be a little In exchange for the series of earnings hits, Eckert, who has been on the job since May, gets a much-needed fresh start after cleaning up a mess not of his making. 0000005243 00000 n Hb```f````e``Re`@ jn10ptWlsdVvV"ew4rN -Je>sSWrzdW,L,jHKKHC (7r xG3Uy' i 311hf`6s`j&w FS ~Cy% A total of 2 acquisitions came from private equity firms. Strategic failure. and Mattel Chairman and Chief Executive Jill Barad said the deal, which now must be approved by federal regulators and shareholders at both companies, would help Mattels ongoing transformation from a toy company to a global childrens products company. Toy manufacturers have typically shipped those pre-orders during the fourth quarter. Monday through Friday. In the third quarter of 1999, Mattel expected The Learning Company to post $50 million in profits but in reality it posted losses of $105 million. All rights reserved. Mattel has been transitioning itself from Mattel said it will now have a $1 billion interactive software business with Do Not Sell or Share My Personal Information. Were competitive but the good thing is that were a close family and theres enough to do for everyone out there, Alec Gores said. MATTEL AND THE LEARNING COMPANY: A CASE OF AN ACQUISITION IN TROUBLE Laurel Mitchell, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA 9171 I. . because retailers aren't reordering toys. To those familiar with lists like these, the presence of AOL and Time Warner at the top of this list will come as little surprise. December 14, 1998 / 10:38 AM / CBS MarketWatch. jMK>EmBe{Pa!Ad1W$>5 d] The transaction as described makes for an excellent fit, said David Leibowitz, a toy industry analyst with Burnham Securities in New York. Mattel and The. Earlier, Hasbro purchased electronic games company Tiger Electronics Inc. and software games maker MicroProse Inc. And while Mattel and Hasbro have had tough times in the past making the adjustment to interactive kinds of stuff, this deal would seem to get thumbs up from everyone involved, said Eric Johnson, a marketing professor at Vanderbilt University in Nashville who studies the industry. Problems (1) Expecting too much and paying too much for the Learning Company He added that the restructuring is expected to generate about $200 million in pretax savings. Some deal watchers said that software maker Havas, a U.S. subsidiary of French media giant Vivendi, might still be interested in the business or pieces of it. Mattels largest acquisition to date was in 1998, when it acquired The Learning Company for $3.8B. The products for preschoolers through second graders feature Reader Rabbit, and software for more advanced students features The ClueFinders. Although Mattel declined to outline the specifics of either its arrangement with Gores or its restructuring programs, sources familiar with the negotiations said Mattel will share in any Learning Co. profit based on a sliding scale that will move down over a five-year period. and This final pricey deal ultimately led to the ouster of one of the 1990's highest profile corporate chiefs. Fill out the form to connect with a representative and learn more. 0000005095 00000 n I didnt see inventory concerns preventing any retailer from asking for more Furbys, Leibowitz said, referring to a fuzzy, interactive, talking ball that is one of this seasons hottest sellers. America Online and Time Warner (2001): US$65 billion, Daimler-Benz and Chrysler (1998): US$36 billion, Google and Motorola (2012): US$12.5 billion, Bank of America and Countrywide (2008): US$2 billion, Mattel and the Learning Company (1998): US$3.8 billion. Eckert is clearing the decks and cleaning up the cost structure, said analyst Jill Krutick, of Salomon Smith Barney in New York. As Gores worked over the last several weeks to woo Mattel, the firm faced competition up until the final minutes before the deal was struck from another player with a strikingly similar niche position--Platinum Equity Holdings, also based in Los Angeles. a toymaker into more interactive items. And so they did. Mattel designs, manufactures, and markets a broad variety of toy products. "They began in July, or August and had accelerated since then," she said. As CEO of Mattel Inc., On December 14, 1998, Barad announced that Mattel would acquire The Learning Company (TLC) for about $3.8. Those efforts will result in an additional $250 million in restructuring charges over the next 2 1/2 years, Eckert said. Mattel, with $4.85 billion in annual revenue, will grow dramatically if the deal is completed. The Learning Company was an early star in the interactive gaming world, creating the popular children's program "Where in the World is Carmen Sandiego?" Speak with a Gartner specialist to learn how you can access peer and practitioner research backed by proprietary data, insights, advice and tools to help you achieve stronger performance. It has been said in some quarters that the two cultures were too different to ever be brought together. we equip you to harness the power of disruptive innovation, at work and at home. 0000001369 00000 n A stockholders guide to types of takeovers, rights and responsibilities. But Mattel shares (chart) have been battered lately. Economies of scale are one of the reasons that are cited for many transactions in M&A, but economies of scale are not an end in themselves. Manage all your deals & contacts in one place, Speed up and simplify due diligence process. As earnings from lines such as Barbie and Hot Wheels took a dramatic fourth-quarter tumble, toy manufacturer Mattel Inc. on Monday announced a $3.8-billion merger with Learning Co., the nations second-largest software company and owner of popular titles including Carmen Sandiego, Riven and Myst.. Combined reach Not only is Gartner research unbiased, it also contains key take-aways and recommendations for impactful next steps. Its not just you, Work phones make a comeback as offices ban WhatsApp, TikTok, Stocks jump as Wall Street cruises to best day since January, Car debt piles up as more Americans owe thousands more than vehicles are worth, Look up: The 32 most spectacular ceilings in Los Angeles, Hidden illegal casinos are booming in L.A., with organized crime reaping big profits, 19 cafes that make L.A. a world-class coffee destination, David Lindley, guitarist best known for work with Jackson Browne, dies at 78, This fabled orchid breeder loves to chat just not about Trader Joes orchids, Calmes: Heres what we should do about Marjorie Taylor Greene, Chicken-flavored ice cream? All rights reserved. "The problems with the acquisition can't be overstated. It produced a grade-based system similar to Knowledge Adventure's JumpStart series. Meanwhile, Mattel's profit problems hurt shares of both companies, despite the news of the $3.8 billion stock swap. Mattel said today that it is looking to sell its interactive software unit, The Learning Company, which the toy maker had characterized as a distraction and blamed for disappointing 1999 earnings, less than a year after buying it. Although approved by most of the board members who continue to steer Mattel, the Learning Co. acquisition was brokered by former Chief Executive Jill Barad, who in February lost her job over Learning Co.s more than $300 million in losses. 90245 The Companys most targeted sectors include consumer products (60%) and digital media (10%). w!,|8\-X>k?vz"hq`gJSgt,E^ottC. This is Mattels 3rd transaction in the United States. It consists of the opinions of Gartners research organization, which should not be construed as statements of fact. Mattels portfolio of brands and products include Barbie, Polly Pocket, Little Mommy, Disney Classics, Monster High, Hot Wheels, Matchbox, Radica, Battle Force 5, Tyco R/C, Fisher-Price, Power Wheels, and American Girl. Privacy Policy. Instead of being on a screen, children could interact with [Reader Rabbit] as a plush toy that can change its content by downloading [information] from the Internet," he said. IhQkBj2=N`TxlaD$(G;X-G3I`8E-v|!SZi3;:)Hci^8THPq$[q!R,n RUg-4)J y&D>QhtSWG73}E+:G#qKUooR1)GULlgc Its not just you, Desperate mountain residents trapped by snow beg for help; We are coming, sheriff says, Look up: The 32 most spectacular ceilings in Los Angeles, Hidden illegal casinos are booming in L.A., with organized crime reaping big profits, 19 cafes that make L.A. a world-class coffee destination, David Lindley, guitarist best known for work with Jackson Browne, dies at 78, Newsom, IRS give Californians until October to file tax returns, Work phones make a comeback as offices ban WhatsApp, TikTok, Stocks jump as Wall Street cruises to best day since January, Car debt piles up as more Americans owe thousands more than vehicles are worth, Chicken-flavored ice cream?
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