Top Ten Business Deals of 2013: Office Depot – Office Max

By — on / Dealmaking

Office Depot’s $976 million, all-stock acquisition of OfficeMax, announced on February 20 and completed on November 5, was widely praised as an important step toward consolidating the office-supply industry, which has suffered from a glut of stores amidst competition from online retailers and declining demand for paper and ink.

Somewhat lost in the praise was the potential impact of Office Depot and OfficeMax’s merger on their rival, Staples. The day after the merger announcement, shares of Staples rose 13%. That reflected a market-capitalization gain of $1.1 billion—about three times the amount of the combined $314 million gain for Office Depot and OfficeMax.

“If there are benefits from this office-supply-store merger, investors seem to be saying that they are going to Staples,” wrote Justin Lahart in the Wall Street Journal. The merger known as “OfficeOffice” is likely to close stores and lessen the pressure of market oversaturation on Staples, which could also snare new corporate customers if the integration gets off to a rocky start.

The story points to the importance of considering how the outcome of your negotiation will affect outside parties, including your rivals. Will benefits accrued by outside parties outweigh any gains you expect to receive? Could these benefits allow the outsider to sabotage your best-laid plans? Assess in advance whether there will be enough value to go around—or if you could lose in the long run to a newly bolstered competitor.

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