Harvard Business School
September 15, 1988
On March 23, 1979, Emerson Electric Company acquired Skil Corporation, a manufacturer of
portable power tools, for $58 million. With sales of $2.6 billion in 1979, Emerson Electric produced a
broad range of electrical and electronic products and systems.
Emerson Electric Company
Emerson Electric, originally a manufacturer of electric motors and fans, had gradually
expanded into a broad range of consumer and industrial products. It classified its businesses into
commercial and industrial components and systems; consumer goods (including portable electric
tools); and government ...view middle of the document...
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Emerson had embarked on a program of acquisitions to meet its aggressive goals of growing
sales 15% annually and doubling earnings by 1981. Previously, Emerson had acquired only
financially successful companies and had retained existing management. With the Skil acquisition, it
broke precedent. Carried by a highly profitable electronic switch company, Skil had registered
mediocre financial performance. Because of Emerson’s major position in the chain saw industry with
its Beaird-Poulan Division, for antitrust reasons Emerson had to divest Skil’s $20 million in chain saw
sales on acquiring Skil. From Emerson’s perspective, Skil was a turnaround situation.
Chuck Knight, CEO of Emerson, wondered if Skil would represent a successful new
diversification approach or prove that Emerson’s past acquisition philosophy had been correct. Jim
Hardymon and Bill Davis, Emerson veterans installed as Skil’s new president and marketing vice
president, had a more pressing problem. Faced with stiff competition from Black & Decker, Sears, and
emerging Japanese competitors, Hardymon and Davis had to forge a new strategic direction.
The Portable Power Tool Industry
The power tool industry consisted of portable and stationary tools powered by electricity,
gasoline, or air. Stationary tools such as table saws, band saws, radial arm saws, large grinders, and
sanders were large, heavy units mounted on floor stands. Portable tools were hand held and mostly
powered by an electric motor. The gasoline-powered chain saw was one of the few portable tools
with a nonelectric engine. Pneumatic power was largely restricted to automotive tools such as
grinders, buffers, impact wrenches, drills, and hammers. In 1979, portable electric power tools
accounted for the majority of industry volume.
Portable electric power tools came in a wide range of sizes, prices, and qualities. Principal
products were saws (circular, reciprocating, sabre, or jig); drills (corded or cordless, regular or
hammer); and sanders (disc, orbital, belt, or combined sander/grinders). Other products included