The Law Office of Lynnette Ariathurai A Professional Corporation

Office Depot might benefit from business merger in the New Year

Individuals in California are not the only ones thinking ahead to the New Year, as many companies are already considering ways to maximize their success after 2014 draws to a close. While some businesses may plan on rolling out new products or marketing strategies, others might hope to find success through a business merger or acquisition. Even though nothing official has been announced, rumors that Office Depot Inc. may be acquired by a rival office supply company have been circulating. 

Both Office Depot and Staples Inc. have suffered a significant decline in sales. Reduced revenues have led to store closings and employee layoffs for both companies, and the same-store sales at Office Depot have flat lined or decreased for the past eight years. It has been suggested that these figures could be improved by reducing redundancies and overlaps that Staples and Office Depot provide.

In total, the retailers could potentially slash $1 billion in overlapping costs if Staples acquires Office Depot. Other estimates put this savings at an even higher amount, although it would require Staples to handle the cost of the acquisition either entirely with or, at minimum, partly with cash. The merger would allow the reduction of the number of stores by about 30 percent, taking the 3,000 stores that are currently open between the two chains down to about 2,100. 

If Office Depot and Staples do decide to merge, it will likely be at the urging of the same investor who brought Office Depot and OfficeMax Inc. together in what was a relatively successful move. Until something more solid than rumors are announced, only speculation on the possible merger remains. However, even speculation can provide valuable insight for California businesses or companies that are considering a similar move. Sometimes a business merger is based on acquiring a successful rival, while others may be pursued in an effort to cut costs and increase the likelihood of a successful future for all involved.

Source: bloomberg.com, "Staples Would Get 60% Boost From Office Depot Takeover: Real M&A", Tara Lachapelle, Dec. 11, 2014

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