Watching the tool industry consolidate under larger and larger umbrellas is a fascinating process, and one that we track closely. It is a topic that comes up in almost every meeting I have with tool industry execs from companies large and small. I've said many times that the tool industry is one of the most dynamic sectors within the construction industry because of the pace of technology and product breakthroughs. But lately the acquisition and shifting of brands lend even more fuel to my case.
Umbrella companies usually buy brands to gain market share (and, of course, profits) by reducing competition, lending brand credibility, filling a category niche, serving new price points, or reaching new markets, like woodworking or commercial applications. Then there's the technology. It doesn't hurt if a brand acquisition includes innovative products, advanced R&D, and a top-notch industrial design team. In some cases, these might be the prime values in a deal.
The underlying questions, and the ones I most frequently ask, are, "How does your company get the most out of joining a larger family without losing your identity?" I also want to know, "What happens to your products when you have to share your technology? What do you gain? What do you give up?" It's interesting to hear the responses, which usually focus on the positives. And I've talked to enough execs, product engineers, and designers at enough companies to recognize the true positives this trend can produce, especially where multiple brands under one roof can share processes and technologies to increase each separate tool company's design capabilities, technical developments, and manufacturing capacities.
This trend has increased the speed to market for new tools. That's the good side. But on the other side are the risks of mergers, where a distinct brand, built on its own product development and leadership, could lose the products and distinctions that made it an attractive purchase in the first place.
But all of this is theoretical. The real question is this, "Is this good or bad news for tool buyers?" So, last month, I launched a reader survey to find out what you think, and it's drawn a strong response and a clear reaction. Here are some of the results, and the challenges tool companies face: 73% of respondents are aware of and follow this trend; About 50% thinks it hurts the acquired brand; 68% thinks it hurts the tools produced by the acquired brand; 74% say consolidation hurts tool buyers and their choices; 66% say they've changed their opinion about brands after hearing they've been acquired.
On the plus side, 82% believe that acquired brands can gain by sharing design and technology resources. Tool companies would be wise to address these perceptions.