Mega Bloks is growing. Growing is not just about growing bigger: it should be about growing better. It sounds as though the Mega Bloks’ acquisition announced this morning does do just that. Some marriages seem driven by the lust for size of the acquiring company. That seems why such unlikely unions as Adobe and Macromedia or Hewlett Packard and Compaq occur. There’s no synergy there, which should be the only reason why companies should come together. Unless 2 + 2 = 5, what’s in it for the shareholders.
The Mega Bloks’ acquisition would seem to be almost a case study in synergy. Mega Bloks, a Montreal success story, is already the world’s second-largest maker of construction toys. It’s now acquiring Rose Art Industries for $ 350 million U.S. There are four reasons for that synergy:
- Rose Art is strong in the US, while Mega Bloks is strong internationally.
- Mega Bloks sector, toys, is not growing while the Rose Art sector, crafts, is a steady grower.
- Mega Bloks sells more to boys, while Rose Art sells more to girls.
- Rose Art’s sales are stronger in the early part of the year, while Mega Bloks’ sales peak during the Thanksgiving to Christmas period.
The acquisition will also move Mega Bloks to be the fifth-largest publicly traded toy manufacturer. That’s very impressive. However never mind the size, feel the synergy.